Colliers International, the global real estate consultancy, today released its Dubai House Price Index for Q2 2009, which indicates a 9% decline in the overall value of residential properties between April and June 2009.
The Index, compiled using mortgage transaction data from financial institutions accounting for 60% of the mortgage market in Dubai, also demonstrates a 48% year-on-year decline between Q2 2008 and Q2 2009. At the end of Q2 2009 property prices in the Emirate had returned to approximately the same level as those recorded in Q2 2007, and were down 50% from their peak in Q3 2008.
The volume of market transactions increased by 50% during Q2 2009 over the previous quarter. The increase in transactions is attributed to the gradual expansion of finance options to purchasers during the period, mainly for completed properties, or properties very near completion, and primarily among first tier developments or masterplans.
The decline in the value of the Index is due to a number of interrelated factors. The availability of finance, expatriate job security concerns and transparency about delays and postponements have continued to hamper the market’s recovery. However, the rate of decline of residential capital asset values during Q2 2009 decelerated dramatically from 42% in Q1 2009 to 9% in Q2 2009.
During Q1 2009 Colliers highlighted the increased importance of the professional investor and the existence of the price/yield gap. This quarter’s House Price Index indicates that while this gap still exists, it has narrowed as prices move towards greater stabilisation. Professional investors were joined as purchasers in the market by a limited number of end users who were able to secure finance against high-end villas in prime locations in the emirate.
Ian Albert, Regional Director, Colliers International, said: “After a significant decline in the first three months of the year, the market witnessed a deceleration in the rate of decline in residential prices in the second quarter. Thankfully, the magnitude of the decline that occurred in Q1 2009 was not, and is now very unlikely to be repeated.”
Commenting on future expectations Albert added: “In the coming months the market will be searching for further evidence of market stabilisation as we draw nearer to the bottom of market prices. However, the results of the third quarter are traditionally distorted by the summer holidays and the holy month of Ramadan, and we would expect Q4 2009 to be a better indicator of future trends.”
The House Price Index analyses the trends for prices achieved for completed properties and properties still under construction. When the Burj Dubai development was included in the results, the Index indicates that completed properties fell 16% and properties under construction fell 3%. Excluding the Burj Dubai development, completed properties fell 19% and properties under construction declined 1%. The lower rate of decline for properties under construction is attributable to the fact that bank finance for properties more than 6 months from completion has largely been withdrawn, and therefore there is very little or no data against which to note the change in actual prices.
Key findings:
§ Decline in the overall index of 9% between Q1 2009 and Q2 2009.
§ Year-on-year decline of 48% between Q2 2008 and Q2 2009.
§ Blended average rate for residential property in Q2 2009 down from AED 1,037/ft² (AED 11,162/m2) in Q1 2009 to AED 949/ft² (AED 10,215/m2).
§ Apartment prices decreased by 3% in Q2 2009 compared to Q1 2009.
§ Villa prices decreased by 18% in Q2 2009 compared to Q1 2009.
§ Townhouse prices declined by 11% in Q2 2009 compared to Q1 2009.
§ Prices in Q2 2009 declined 50% from the index peak recorded in Q3 2008.
§ The number of transactions increased 50% in Q2 2009 compared to Q1 2009.
§ Apartments constituted 42% of the total transactions, declining from 55% in Q1 2009.
§ Villas constituted 41% of the total transactions, increasing from 39% in Q1 2009.
§ Townhouses constituted 17% of the total transactions, increasing 7% from Q1 2009.
