Property market blowing hot and cold

New reports tell different stories about the state of the UAE property market.

The completion of new projects continued to put downward pressure on apartment prices in Dubai in the fourth quarter.

Reports released yesterday offer contrasting perspectives on the state of UAE property markets.

This year will be "better in Dubai", thanks to increased transparency and improved investor confidence, Sultan bin Butti bin Mejren, the director general of the Dubai Land Department, said during a property conference.

Dubai posted Dh120 billion (US$32.67bn) of property sales last year, which was "promising", Mr bin Mejren said.

The level of transactions was "about the same" as in 2009, a Land Department spokeswoman said.

But a report issued by the property consultancy Landmark Advisory offered a more pessimistic view, concluding that values "across all segments of the market" continued to decline in the fourth quarter last year.

In Dubai, prices for apartments fell 5.8 per cent in the quarter and villa prices dropped 1.4 per cent, Landmark found.

The completion of new projects continued to put downward pressure on prices, the company said.

"This issue will be exacerbated due to the fact that 2010 saw significant postponements in delivery, with roughly half of the 50,000 or so units we had expected to be handed over delayed," said Saeed Hashmi, the head of valuation at Landmark.

In Abu Dhabi, in Landmark's view, the residential market is undersupplied but "continues to behave as if it is oversupplied" because of the availability of homes in Dubai.

The final quarter of last year was a "transitional period", with prices in some Abu Dhabi developments falling as much as 17 per cent. In some areas, rents were down 31 per cent compared with the previous year, Landmark reported.

However, "sentiment overall has improved and there are signs of investors reconsidering the UAE, in particular Dubai, as a place to invest again", the report said. Landmark predicted that prices in some Dubai neighbourhoods would "bottom out" this year.

The UAE's property markets could benefit from political turmoil in other countries in the region, according to speakers at yesterday's Arab Real Estate and Urban Development Conference in Dubai.

Last October, Jones Lang LaSalle was "bullish" on Saudi Arabia and Egypt and pessimistic about the prospects for the UAE, said Blair Hagkull, the chairman of the Mena office of Jones Lang LaSalle.

"What is happening now is the pendulum is moving in the UAE's favour," Mr Hagkull said. From 2009 to last year, the value of property transactions in the UAE dropped 35 per cent, while the value of global transactions was up 44 per cent, according Jones Lang LaSalle data.

But the UAE is now considered to be a relatively stable market.

"People are looking for a place where real estate can retain value," Mr Hagkull said. Property companies are already reporting more activity this year.

"Early signs are that transactions are up," said Ian Albert, the regional director of the Middle East for the property brokerage Colliers International.

He expects sales to continue growing this year, which should help values. "New supply will be absorbed in time," he said.

Foreign direct investment in the UAE increased after every global crisis in the past 20 years, Mr Albert said. But political turmoil will affect all markets in the region, according to analysts.

"We have to accept the reality of what is going on," Mr Albert said.

"I feel like we're heading into a recovery period, but the troubles in the region will put it in pause."