Dubai's property market is still looking at tough times ahead, as its recovery is being slowed down by worries over the global recovery and the European sovereign debt crisis. Property prices have already fallen by an average of 60% from their peak, and it is now estimated they will fall a further 10%. The problem is that even though sales volumes are improving, and some sectors are seeing slight increases in prices, the market is still blighted by oversupply and lack of investor interest.
Most experts see no signs of a recovery this year, although over a third expects things to improve slightly next year, while two thirds expect an improvement by 2013. It's estimated that the property market in Dubai is oversupplied by around 25%, and the property price crash here is expected to be more than double that seen in the US.
Things aren't much better in Abu Dhabi which had initially fared much better during the economic downturn but is now facing its own oversupply of homes, as around 11,000 homes are expected to enter the market by the end of next quarter, according to a report by Jones Lang LaSalle. This is expected to cause prices to fall by another 14%, which would be 60% from their peak values. It is expected that the markets in both Dubai and Abu Dhabi will continue to adjust over the short term due to difficulties in financing mortgages and increased home supplies. This is also expected to affect rents as rental costs are predicted to drop by 8% in Dubai this year and by 5% in 2012. Rents in Abu Dhabi are expected to fall by 14% this year and by 10% next year.
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