Despite falling property prices, property developers in Dubai are still launching mega projects, reported Reuters.
In fact, the annual Cityscape property fair opened this week, with home builders expecting prices to drop by around 15 percent this year, but are confident that large projects will not be abandoned as seen during the 2008 global financial crisis.
At the event, several companies displayed models of sprawling villa compounds, new skyscrapers, leisure centres and a new indoor ski slope.
Analysts have warned of a decline in property values, which have recovered significantly over the last two years after losing half their value during the 2008 crisis.
“Residential prices have fallen maybe nine or 10 percent this year,” said Craig Plumb, Middle East and North Africa research director for JLL.
“We expect prices to go down further over the rest of the year,” he noted, adding that the drop is mainly due to global conditions, such as falling oil prices and global nervousness with the slowing Chinese economy.
“The Dubai residential market is very much affected by what’s going on in the rest of the world because a large number of people buying here are investors coming from overseas,” he said.
Plumb expects prices to fall for another year, with this year registering a 15 percent drop.
Recently, property consultancy Knight Frank revealed that the annual price drop to June 2015 was more than 12 percent.
Signs of softening prices began to show after authorities in the UAE introduced strict regulations, which included mortgage caps, to prevent a new bubble from forming.
They capped mortgage financing at 75 percent for expatriates buying their first property and 60 percent for second and subsequent property purchases. For those who cannot afford down payments of 25 percent or more, this effectively prices them out of the market.
As such, Plumb does not foresee prices will nosedive as they did during the crisis.
“We are seeing a much more stable market and that is a sign of better regulation.”
Romesh Navaratnarajah, Singapore Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
