Real estate prices in UAE fall 25 pct

Bloomberg

"We’re in a state of transactional gridlock," a unit of the United Arab Emirate-based real-estate broker said in an e- mailed statement Saturday. "Ambitious master developments have dropped 15 percent to 25 percent since peaking in the third-quarter of 2008" in terms of average prices, it added.

Dubai opened its property market to foreign investors in 2002 followed by Abu Dhabi three years later, fueling a boom bolstered by low interest rates. In the last three months, banks including HSBC Holdings Plc and Lloyds TSB Group Plc have clamped down on mortgages as the global recession began to hurt the region, forcing companies to cut jobs and scale back projects, or even shelve them.

For properties being delivered later than 2011 in Abu Dhabi, prices may retreat as much as 10 percent below the original rates by the second quarter of this year, according to Landmark.

"Investors and speculators saw Abu Dhabi as the next big thing after Dubai, but by then the financial crisis had already hit the U.A.E.," said Jesse Downs, head of research at Landmark Advisory. "Developers are now facing the prospect of renegotiating payments to prevent defaults and preserving enough cash flow to continue construction."

Construction projects totaling $75 billion have been either delayed or canceled in the U.A.E., HSBC Bank Middle East Ltd. said in a note on Jan. 22. The majority of projects affected are high-end residential and commercial developments. Abu Dhabi-based Aldar Properties PJSC’s Raha Beach development was most affected by the fall in real-estate prices, Morgan Stanley said in a note to investors this month.

Abu Dhabi’s rental market has also leveled out in the fourth quarter after average villa rents rose 35 percent and apartment rentals soared 80 percent between the last three months of 2007 and 2008, the Landmark report said.