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Dubai house price falls 8 pc: Colliers

india Updated: Jan 13, 2009 18:29 IST

The prices of houses in Dubai dropped by an average of 8 per cent between October and December 2008 despite a year-on-year price growth of 59 per cent between fourth quarter 2007 and 2008, a global real estate consultant today has said.

According to real estate consultancy Colliers International, the fourth quarter 2008 house price index (HPI), a measure of residential real estate performance in Dubai, shows that the overall average price level is similar to that recorded at the beginning of Q2 2008.

Colliers says the index will help investors benchmark investment v alues over a period of time.

The analysis attributes a combination of tighter liquidity and negative sentiment as the key factors for the price drop.

According to the report, Q4 2008 saw many lending institutions reduce their loan-to-value ratios available to mortgage seekers and adopt a more selective view towards appli cants.

International exchange rates also played a role, as the decline in the value of major currencies made dirham denominated assets more expensive and discouraged some international investors.

While negative sentiment, precipitated by the global economic crisis, the postponement of developments by large government-backed developers and concerns over job security further deterred potential property investors as they await signals that the market has bottomed.

Ian Albert, the Regional Director of Colliers International said, "There is no escaping the fact that for the first time since the HPI was launched, overall average residential prices in Dubai have fallen. Investors accustomed to continual price rises will have to recognize this, as the global financial crisis impacts the region."

Tighter liquidity, more selective lending and growing negative sentiment are all bringing about these changes. However, an overall average price fall is not as bad. What established investors now need to consider is at what stage they entered the Dubai market because this will broadly determine whether the value of their investment, Albert said.

In what it says is a maturing market environment, Colliers emphasised a return to fundamentals, where developers that focus on the end-user by building high quality, well located and properly designed projects will outperform the rest of the market.

The index has also registered a 45 per cent drop in transaction volume in Q4 2008 compared to Q3 2008. Apartments overall average price fall of 11 per cent in Q4 2008 from Q3 2008 while villas overall average price fall of 3 per cent in Q4 2008 from Q3 2008.