UAE House Prices to Climb 15% in 2008

Massive housing shortages within Dubai's booming property market will thrust real estate prices up 15% this year, according to a report by Standard Chartered.

The bank said the emirate’s real estate market faced years of undersupply due to population growth and project delays.“Our view is that we will see growth rates of around 15% in real estate prices this year. We would view any rises above this as a sign of overheating," Philippe Dauba-Pantanacce, senior economist at Standard Chartered, said in the report.

"Residential demand has not been fully met by supply, because of higher than expected population growth, and because the supply side has been unable to deliver the planned units."

New demand for residential units is estimated at around 70,000 a year, but the supply is only 57,000 units, with insiders suggesting that only a third of the residential units planned for 2007 have been delivered, the report said.

Dubai’s projected population growth rate of 10% per annum would also well exceed the emirate’s planned housing and infrastructure capacity, it said.

The report said prices in the commercial sector would also continue to rise, despite the large number of units expected to come onto the market.

“A substantial amount of office space is expected to come onto the market in the next 18 to 36 months, which could ease price pressures, but we do not see prices collapsing in this environment,” Dauba-Pantanacce said.

Dauba-Pantanacce said concerns that Dubai's property market was a "bubble" waiting to burst were unjustified as the market was underpinned by very strong fundamentals.

However, he said sector needed urgent management to stop it overheating due to inflation, which hit a 19-year high of 9.3% in 2006, the latest official figure.

Dauba-Pantanacce called on the UAE to revalue or sever its link to the US currency to help fight inflation.

“Because of the dollar peg, the expansionary policy of the Fed is being imported into the Gulf, meaning that borrowers are being rewarded and the clear danger is more speculative inflows into the housing market,” he warned.

Sky-high house prices in Dubai will rocket even further this year as the price of materials and wages drive up construction costs, Egyptian investment bank EFG-Hermes said on Tuesday.

Egyptian investment bank EFG-Hermes in January predicted UAE house prices would rise by 5-10% this year, but last month said strong demand for property, coupled with a housing supply shortage, were likely to push prices up even further.


http://www.arabianbusiness.com/514367-property-prices-to-hit-15-growth-in-2008---bank?ln=en