Luxury real estate prices in Dubai set to fall further this year

According to a recent Reuters poll, the debt crisis in Dubai is set to cause further price deceases this year. Prices are already some 60% off and are continuing to decline with a lack of potential investors and serious over supply. According to Fabio Scacciavillani, an economist at the Dubai International Financial Centre in an interview with Reuters this week,

“The recent woes of Dubai World have further sapped the prospects of a recovery in real estate,”

Which sounds like the understatement of the year to me. For once analysts and estate agents agree and no one but the die hards are predicting anything other than a downward spiral with no recovery until 2011 – maybe. The concensus is that prices will fall another 10% this year and 3% in 2011.

Honestly – predicting what is going to happen in any real estate market has become a complete and utter crap shoot recently. The British Government Inc has managed to eke out an increase in prices by preventing banks from making repossessions, cutting interest rates to the bone and printing billions of extra money. Albeit at the cost of 20% of estate agents in the UK – seeing as sales volumes are still around 1/3rd of normal.

So – who knows what will happen? The recent laws, hastily thrown together in the wake of defaults and a mass exodus of ex-pats might have an impact, but I doubt it. There is a massive slew of canceled projects in Dubai – and the rest of the Emirates for that matter.

According to Deutsche Bank, there will be somewhere around 32,000 extra units on the market this year which is a substantial over supply, so price weakening is probable.