Rents in Dubai rose in June, according to a new report
Dubai property prices and rents recovered slightly in June, signaling that the worst for the sector may be over, according to Deutsche Bank.
The average house price for apartments and villas rose 6.5 percent month-on-month in June to AED1,285 ($349.9per square foot, while rents rose 1.1 percent over the same period following a 10 percent fall, Deutsche Bank said in its proprietary price index, which covers 13 locations in Dubai.
"Although monthly data should be viewed with caution given the limited number of transactions, recent numbers tend to confirm the stabilization in the market we saw in May," said Nabil Ahmed, head of research at Deutsche Bank in Dubai in comments published by newswire Dow Jones.
"This might not be the bottom yet, but the worst increasingly looks behind us," he said.
The global financial crisis has taken its toll on the UAE's once-booming property sector with the slump so far wiping an estimated 50 percent off Dubai prices since their peak in August 2008, Deutsche said earlier this month.
"We believe the stabilisation in prices was mainly driven by easing pressure from distress sales and potential remaining sellers now being unwilling to sell at current prices, off 50% from peaks on average," Deutsche Bank said.
"Our industry contacts confirm that prices have tended to stabilise, even increased in some areas, but the level of transactions/ demand remains very low," it said.
Deutsche said it still expects property prices to bottom out at the end of the year after falling a further 15-20 percent.
"We continue to see risks of further weakness on the combination of expatriates' exodus during the summer and new supply flowing into the market in the second half of 2009. However, the worst regarding property prices increasingly looks behind us," Deutsche added.
The latest report on the Dubai market comes just days after one senior analyst described it as one of the "riskiest" property markets of the post war era.
Saud Masud, analyst at Swiss investment UBS, said problems of over-supply and population shrinkage with thousands of jobless expatriates expected to return home when the schools break up next week, would mean continued pressure on house prices.
"In my view Dubai's property risk profile appears to be one of the highest in the post war era and while one may debate the potential support factor from Abu Dhabi the fundamental oversupply and population dynamics risks are very much there," he told Arabian Business.