Drastic correction unlikely

Image Credit: Gulf News ArchivesImage Credit: Gulf News Archives

A large majority of business executives believe a drastic property market correction in Dubai is unlikely, according to a survey by the London Business School. Conducted with more than 200 respondents to analyse Dubai’s booming residential market and the possibility of another real estate bubble, it revealed that 84 per cent of executives don’t believe prices will plunge the same way they did in the 2008-09 market correction.

“The vast majority of executives surveyed do not believe there will be a drastic decline in residential real estate prices in Dubai over the next 12 months,” said João Cocco, Professor of Finance at London Business School. “Only 3 per cent expect an annual decline larger than 20 per cent.”

Despite speculation from real estate analysts across the UAE and the region about soaring property prices and the risk of another bubble, almost half (47 per cent) of the respondents said they would invest in Dubai. More than a third cited the emirate’s strong economic outlook as their main reason. Others included high rental yields, quality of life in the UAE and preferring to purchase.

Around 44 per cent of respondents, who included alumni, current executive MBAs and past participants of the school’s Executive Education programmes, said greater restrictions on real estate supply would most effectively limit market speculation and prevent a future property bubble. Tighter eligibility for home finance loans would also help, said 18 per cent of those surveyed.

“Roughly half of the executives surveyed recognise the risk that the supply of new properties will increase at a faster rate than demand - leading to a situation of oversupply and a decline in real estate prices — and favour greater restrictions on construction as a way to mitigate this risk,” said Cocco.

The respondents were divided on the question of whether prices would move upward or downward, with just over 50 per cent saying they will decrease, and the rest saying they will remain stable or increase.

At least 68 per cent respondents predicted that Dubai’s residential market will not continue to grow at the same rate as it has thus far, while 51.5 per cent thought that any losses or gains in the market will be within 10 per cent of their current value. Around 31 per cent stated the market will decrease by less than 10 per cent and 20.5 per cent predicting an increase of less than 10 per cent.


Source: Property Weekly


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