It’s not news that Dubai’s property market is expected to experience corrections next year and according to Morgan Stanley gradually decline by up to 10 percent by 2010. However, a real bombshell was dropped last Thursday when Arabian Business reported that Palm Jebel Ali’s island prices have depreciated some 40 percent in the last two months.
After all the hype and excitement about Dubai’s market, this news is certainly a wake up call for many would be investors who are standing on the brink of making a decision right now.
This fall in property values has been pinned on the global crisis and current investors who liquidate their assets in Dubai in order to keep their cash flow going.
This turn of events puts the development (and more to follow for sure) back to where they were some two years ago. To make matters worse, local Dubai mortgage providers acted and reduced home financing loan-to-value (LTV) to about 70 percent down from 90 in October. Of course this isn’t helpful for those looking to finance a property loan right now.
Five and six bedroom villas on the island used to be valued at around 16 million Dirham (approximately $4.35 million). In the last couple of months however these prices were depreciated to 9 million Dirham instead – a huge loss for current property owners.
Despite this, they didn’t really lose out on a bargain since overall the value of properties on the island increased by as much as 80 percent from the original launch buying price.
As reported from various realtors in Dubai, sales have dried up and making them seems harder these days, unless they accept a significant drop in property prices.
It will be interesting to see whether those predictions will come true in the near future. As for now, it is probably a wise move to hold on the investment for existing property owners while new buyers can snap up a bargain.