Dubai Residential Prices May Stay Flat Through 2010

By Matthew Brown and Arif Sharif

Oct. 5 (Bloomberg) -- Home prices in Dubai, the second- biggest of the seven sheikhdoms that make up the United Arab Emirates, are likely to remain flat until 2010 after five years of steep gains, Colliers CRE Plc said.

About 140,000 new homes will be completed in Dubai by the end of 2010, adding to the existing stock of about 300,000 units, Colliers said in a report released in Dubai today. Home prices average $5,420 per square meter, or $504 per square foot, in Dubai, compared with $6,500 a square meter in neighboring Abu Dhabi, the report said.

``We've not seen a drop-off in demand, but there has been a slowdown in value appreciation,'' Ian Albert, Colliers regional director, told reporters in Dubai. ``As we sit here today there is insufficient supply in property across the Middle East and North Africa, in residential, office, leisure and retail.''

Dubai is aiming to become a regional financial center and is spending billions of dollars on finance and tourism projects to diversify its economy. Property values in the U.A.E., the second-biggest Arab economy, have quadrupled over the last five years, investment bank Al Mal Capital PSC said in a report March 9. Dubai's residential property prices rose 40 percent from a year earlier, slowing from an annual 41 percent in May, Al Mal said Aug. 14.

Emaar Declines

Emaar Properties PJSC, the Middle East's biggest publicly traded real-estate company, lost the most since 2000 on concerns that the U.S. bank bailout won't be enough to stop the global credit crisis reaching Dubai. It fell as much as 13.4 percent to 6.67 dirhams, the biggest one-day drop since March 2000, according to data compiled by Bloomberg.

The biggest threat facing the Dubai property market is liquidity, Albert said. The departure of speculators from the market may also lead to prices falling, he said.

``We are concerned about developer bias toward the high- end residential segment, when demand for housing from the middle-income segment is most acute,'' Colliers said in the report, titled `MENA Real Estate Overview.'

To contact the reporter on this story: Matthew Brown in Dubai at mbrown42@bloomberg.netArif Sharif in Dubai at asharif2@bloomberg.net