01 April 2011
Dubai tops the list of the world's worst housing market in the past six months, but is a turnaround imminent?
Dubai has been the world's weakest housing market in the past six months, eclipsing the embattled and tortured real estates markets of Greece, Spain and Portugal, according to a survey from U.K.-based real estate consultancy Knight Frank.
At a time when global housing prices have risen by 2.8 per cent, Dubai's housing prices have fallen 10.1 per cent in the past six months, and 6.1 per cent in the year.
The 10.1 per cent decline is slightly below the 12 per cent fall estimated by Jones Lang La Salle, and shows the pain the emirate's real estate market continues to go through.
The decline is in sharp contrast to other emerging markets, where 'hot money' created by U.S. Federal Reserve has allowed investors to pump funds into real estate. In addition, petrodollars have flown into the Gulf region, but have failed to lift prices in the Dubai real estate market.
Hong Kong has been the best performing market in the past six months, rising 10.1 per cent in the past six months and a staggering 20.1% last year (bubble, anyone?), with the combined markets of Shanghai and Beijing rising 6.1% in the past six months and 15.3% in the year.
"In Q2 2010 the proportion of countries in our index recording negative quarterly growth was less than a third at 31%, in Q3 the figure was 35%, in our most recent Q4 figures the proportion is 41%," says Liam Bailey, Head of Residential Research at Knight Frank. "Of course this headline hides big regional and country level differences, but more concerning is the fact that this annual figure hides the fact that a growing number of countries are seeing negative quarterly price movements,"
"The impact of 'hot money' created by quantitative easing may be dissipating, especially in Asia - where the 30%, 40%, 50% and even higher annual rates of growth, which were common in some Chinese and Indian cities a year ago, have now cooled considerably," says Bailey.
Dubai real estate may continue to suffer in the foreseeable future. "Supply in the residential sector continues to be completed, and some major residential projects are scheduled to restart in 2011," notes Jones Lang La Salle.
"Average rentals continued to decline across the residential sector in Q4, with the most pronounced drops for lower-end product in areas lacking completed infrastructure. The prospects for 2011 will be dependent upon increased liquidity entering the mortgage market."
JLL expects a further 25,500 residential units to come on line in Dubai in 2011 further depressing prices.
Although there are recent pockets of stabilisation for Dubai's higher end residential product, residential market will continue to experience a situation of oversupply and prices are not expected to recover before 2012, JLL notes. "Lending will remain a key factor in market recovery. The residential market will likely see improved lending during 2011 as more banks are injecting liquidity into the mortgage market."
But other emerging markets may finally catch up with Dubai's decline. "It looks increasingly likely that Asian markets will escape a crash in prices, but in many of the previously 'hot markets' - price falls later this year seems a realistic assumption," notes Knight Frank.
Hong Kong and Chinese real estate prices are peaking and with the Chinese authorities looking to curb runaway growth and inflation, a soft landing is expected.
Another key statistic in the Knight Frank survey is the increase in all the overall Middle East real estate prices, which grew 5.3%. Unfortunately the survey does not elaborate which Middle East markets grew, but with the regional markets in turmoil and Dubai re-emerging as a safe haven,
some funds could find their way into the Dubai real estate market.
Dubai officials are certainly talking up their economy: "Interest in Dubai as a safe hub for investments has increased during the past two to three years," Sami Al Qamzi, director general of Dubai's department of economic development told Zawya Dow Jones earlier last week. "This interest has increased lately, especially with Dubai offering sound infrastructure and stability for businesses," he added.
It is an interesting thought but with Dubai's housing supply showing no signs of abating, it appears that there might be a few quarters of pain to go through.
Here is a list of the world's worst housing markets over the past six months:
© AlifArabia 2011
Dubai tops the list of the world's worst housing market in the past six months, but is a turnaround imminent?
Dubai has been the world's weakest housing market in the past six months, eclipsing the embattled and tortured real estates markets of Greece, Spain and Portugal, according to a survey from U.K.-based real estate consultancy Knight Frank.
At a time when global housing prices have risen by 2.8 per cent, Dubai's housing prices have fallen 10.1 per cent in the past six months, and 6.1 per cent in the year.
The 10.1 per cent decline is slightly below the 12 per cent fall estimated by Jones Lang La Salle, and shows the pain the emirate's real estate market continues to go through.
The decline is in sharp contrast to other emerging markets, where 'hot money' created by U.S. Federal Reserve has allowed investors to pump funds into real estate. In addition, petrodollars have flown into the Gulf region, but have failed to lift prices in the Dubai real estate market.
Hong Kong has been the best performing market in the past six months, rising 10.1 per cent in the past six months and a staggering 20.1% last year (bubble, anyone?), with the combined markets of Shanghai and Beijing rising 6.1% in the past six months and 15.3% in the year.
"In Q2 2010 the proportion of countries in our index recording negative quarterly growth was less than a third at 31%, in Q3 the figure was 35%, in our most recent Q4 figures the proportion is 41%," says Liam Bailey, Head of Residential Research at Knight Frank. "Of course this headline hides big regional and country level differences, but more concerning is the fact that this annual figure hides the fact that a growing number of countries are seeing negative quarterly price movements,"
"The impact of 'hot money' created by quantitative easing may be dissipating, especially in Asia - where the 30%, 40%, 50% and even higher annual rates of growth, which were common in some Chinese and Indian cities a year ago, have now cooled considerably," says Bailey.
Dubai real estate may continue to suffer in the foreseeable future. "Supply in the residential sector continues to be completed, and some major residential projects are scheduled to restart in 2011," notes Jones Lang La Salle.
"Average rentals continued to decline across the residential sector in Q4, with the most pronounced drops for lower-end product in areas lacking completed infrastructure. The prospects for 2011 will be dependent upon increased liquidity entering the mortgage market."
JLL expects a further 25,500 residential units to come on line in Dubai in 2011 further depressing prices.
Although there are recent pockets of stabilisation for Dubai's higher end residential product, residential market will continue to experience a situation of oversupply and prices are not expected to recover before 2012, JLL notes. "Lending will remain a key factor in market recovery. The residential market will likely see improved lending during 2011 as more banks are injecting liquidity into the mortgage market."
But other emerging markets may finally catch up with Dubai's decline. "It looks increasingly likely that Asian markets will escape a crash in prices, but in many of the previously 'hot markets' - price falls later this year seems a realistic assumption," notes Knight Frank.
Hong Kong and Chinese real estate prices are peaking and with the Chinese authorities looking to curb runaway growth and inflation, a soft landing is expected.
Another key statistic in the Knight Frank survey is the increase in all the overall Middle East real estate prices, which grew 5.3%. Unfortunately the survey does not elaborate which Middle East markets grew, but with the regional markets in turmoil and Dubai re-emerging as a safe haven,
some funds could find their way into the Dubai real estate market.
Dubai officials are certainly talking up their economy: "Interest in Dubai as a safe hub for investments has increased during the past two to three years," Sami Al Qamzi, director general of Dubai's department of economic development told Zawya Dow Jones earlier last week. "This interest has increased lately, especially with Dubai offering sound infrastructure and stability for businesses," he added.
It is an interesting thought but with Dubai's housing supply showing no signs of abating, it appears that there might be a few quarters of pain to go through.
Here is a list of the world's worst housing markets over the past six months:
| World's 10 Worst Housing Markets | |||
| | City/Country | Six month % | Annual % |
| | | change | change |
| 1 | Dubai | -10.1 | -6.1 |
| 2 | Cyprus | -6.5 | n.a |
| 3 | Lithuania | -5.8 | -10.1 |
| 4 | United States | -5.3 | -2.1 |
| 5 | Ireland | -4.8 | -10.8 |
| 6 | Croatia | -3.7 | -7.2 |
| 7 | Portugal | -3.1 | -1.2 |
| 8 | United Kingdom | -3.2 | 0.7 |
| 9 | Greece | -2.9 | -6 |
| 10 | South Africa | -2.4 | 0.4 |
| Source: Knight Frank |
© AlifArabia 2011
