Chronic oversupply of homes rocks market

BENGALURU: Dubai's beleaguered property market won't rebound anytime soon, according to a Reuters poll of property market experts, largely due to a chronic oversupply of homes coupled with an economic slowdown in the city-state. Dubai house prices have slid by at least a quarter since mid-2014, the peak from its recovery from the 2009 debt crisis, and the end of this latest bout of weakness is not yet near. The Nov 6-20 Reuters poll of 10 economists and property analysts showed average property prices would decline 10% this year and another 5% next year.

While those forecasts were unchanged from a September poll, the median view for 2021 showed them falling at a slightly slower rate of 2.5% compared with 3.3%. An oversupply of homes remains a chronic problem in Dubai, according to every respondent who answered an additional question in the poll. "Oversupply has been a long-standing issue and recent developer activity indicates that this is unlikely to change in the near future," said Chris Hobden, head of strategic consultancy at Chestertons MENA.

The economy in Dubai, which is part of the United Arab Emirates, is heavily reliant on global trade, which has been under threat from the US-China trade war. To try to address the property market slump, the government set up a real estate planning commission in September but it is early days for measuring tangible results. "While the establishment of the Higher Committee for Real Estate Planning suggests an appetite to address the imbalance moving forward, the Committee's market impact is still unclear," Hobden said.

All but two respondents to another Reuters poll question said a further slowdown in activity was more likely than a rebound, while they all said a revival was at least a year away. "While the government has launched a number of initiatives to boost the economy, they will take time to filter through, which means the real estate market will continue on the downward trajectory until they do," said Jenny Weidling, manager of Research and Advisory at Asteco.

But recent sales transactions - which have been rising for 10 months - clocked their highest monthly tally since 2008 in October. Home ownership has become somewhat more affordable after years of falling prices. When asked to describe affordability of the average home on a scale of 1 to 10 - from extremely cheap to extremely expensive - the median response was 5.5, lower than given in September.

Controlling supply, further government stimulus, job creation and visa reforms were listed as potential effective policies for significantly stimulating activity and prices, respondents to another survey question said. "The combination of these government initiatives … are expected to boost FDI, increase business activity and boost market sentiment and thereby boosting real estate demand", said Dima Isshak, a senior manager at CBRE MENAT.- Reuters