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House prices in Dubai ‘approaching bottom’

Real estate prices in Dubai’s battered property market are bottoming out more than two years after the financial crisis sparked a slump that devastated values, an analyst has said.

Fifteen months on from the Dubai World debt crisis, which saw the state-owned conglomerate seek to alter terms on $24.9bn of debt, investor appetite is picking up, said Saeed Hashmi.

“We’re now a year on from the whole Dubai World situation. We’ve moved on, mature markets have stabilised again. Declines are slowing down, we’re getting close to the bottom of the market,” the head of valuation and advisory at Landmark Advisory said.

“People are really looking at Dubai because there are some really good opportunities as prices have moved down,”

The emirate’s housing market has been in decline since 2009. The value of real estate deals in Dubai plunged 65 percent in 2010, data from Jones Lang LaSalle shows, while the number of transactions fell by more than half.

Average house prices in Dubai have tumbled 62 percent from their peak, Deutsche Bank said this month.

Complicating the matter is the threat of new supply, which could further the price slump. As many as 48,000 homes will be completed in the next two years, increasing current supply by 12 percent, Landmark Advisory estimates.

But the property brokerage said Wednesday it has seen growing interest from foreign investors attracted to Dubai’s devalued property market.

“From the end of last year onwards, we have seen a definite increase in interest from overseas clients,” Michael Michael, director of sales at Landmark Properties.

“Such investors are mainly from countries within the GCC or Eastern Europe, indicating a growing sentiment that Dubai’s property market is now offering investors greater value for money.”

The city now compares favourably to global hubs such as Singapore, Hong Kong and London, offering a similar lifestyle at a cheaper cost, said Hashmi.

“If you’re comparing Dubai to other international sectors like Hong Kong and Singapore, it’s now very cheap. They [investors] think that buying an investment now will get capital appreciation going forwards,” he said. “They’re trying to buy it as close [as possible] to the bottom of the cycle, or at the bottom of the cycle.

“The main point is that Dubai is now becoming attractive in comparison to other cities.”

The UAE’s trade and tourism hub may also benefit from the political unrest sweeping the Arab world, as investors seek comparatively safe markets for their funds.

John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, said in February the emirate could see the biggest influx of investment in the wake of the Arab world protests.

“[What] may help Dubai is obviously the crisis in the GCC,” said Hashmi.

“Any instability in those markets will probably bring capital into the emirate because [people] want to keep it within the region, they want to keep it within what they know.”

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