The Dubai real estate market has not yet hit rock bottom and is likely to decline by around 80 percent from the peak prices of 2008, the managing director of JP Morgan’s private banking arm has said.
Paolo Moscovici, head of JP Morgan’s Middle East private banking unit, said prices are currently down by 60 percent and forecast they “might go down another 20 percent. I think that is realistic.”
“It has continued to drop and, peak to trough, I think it could be down 80 percent,” Moscovici told Arabian Business.
Last month it was revealed that 495 of the 980 projects registered with the emirate’s Real Estate Regulatory Agency (RERA) have been scrapped. A poll of regional banks by Reuters found that Dubai property prices have tumbled 55 percent since their peak in 2008.
Moscovici said he believed it would take years for the oversupply problem in the emirate to be rectified. “I personally think it will take five years for all that supply to be absorbed, so prices continue to come down. Do I believe things will come back in Dubai? Yes, but it will take time,” he said.
Michael Atwell, head of Middle East operations for real estate firm Cushman and Wakefield, said the decline in prices may help to eliminate the perception that Dubai is an expensive place to set up business.
“The perception of Dubai still lies in its older view of the market in that it is expensive; office rents are very high and it’s an expensive place to recruit people and house them in terms of housing costs. We all know that has changed significantly in the past couple of years; rents have fallen. There is an opportunity for Dubai to change its image in the market,” said Atwell.
Nick MacLean, managing director of global real estate consultancy CB Richard Ellis in Dubai, agreed with Moscovici’s forecast for a further decline in prices. However, he believed the emirate’s property market is fragmented, with some areas having already hit bottom.“I think that [Moscovici] is right in certain locations. Some parts of the market are still clearly falling and have a long way to fall.”
However, he said some areas, such as Dubai International Financial Centre (DIFC), Emaar Square and Sheikh Zayed Road have shown some price stability and prices were unlikely to decline further.
“The best located buildings, in single ownership [and] of a high standard have reached the bottom, but those that are geographically challenged still have some way to go,” he said.
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