DUBAI: A nearly four-year decline in house prices in the United Arab Emirates won't end this year, as oversupply and concerns over the health of global economy weigh on the market, a Reuters poll showed on Tuesday. Growth in the second largest Arab economy is expected to slow this year to 3.1 percent. That will not help Dubai's property prices to recover after plunging by two-thirds from their 2008 peak. The poll of 11 respondents, including banks, investment firms and research institutions showed house prices in Dubai's beaten-down real estate sector will slip by a median 5 percent in 2012. Prices in the emirate, which is home to the world's tallest tower, the Burj Khalifa, will ultimately ease another 8 percent from here, a median of nine respondents showed. Global markets were rattled in 2009 when Dubai announced a $25 billion debt restructuring of conglomerate Dubai World, bringing its historic building spree to a halt. Neighboring Abu Dhabi, which was resilient during Dubai's property market collapse but is now showing signs of pressure, will see housing prices fall by as much as 11 percent this year. "Macroeconomic concerns compounded with an ongoing supply-demand mismatch will further delay the recovery of the UAE property market," said Patrick Rahal, manager at Doha-based investment company The First Investor. Four respondents said Dubai's property prices will stabilize during the year, while three said they would not do so until 2013 or beyond. Others thought prices had already reached bottom. Expectations that Dubai property will continue to fall in value come as homes prices in the United States, where a spectacular collapse in the housing sector triggered the 2008-09 financial crisis, may finally be stabilizing. A Reuters poll of US home prices found a consensus for no change in the S&P/Case-Shiller home price index in 2012. Supply weighs Economic growth in the United Arab Emirates is expected to slow to 3.1 percent next year from 3.9 percent in 2011, in line with most of the other Gulf oil exporters, weighed down by a global slump. Real estate and construction accounts for nearly 22 percent of the country's GDP. Dubai's aggressive building drive has resulted in oversupply, with thousands of new residential and commercial units set to enter the Dubai real estate market. Dubai's property market is oversupplied by 30 percent, a median of seven respondents showed. Abu Dhabi is oversupplied by 20 percent. "The key message is that despite some recent stability, we still have a good chunk of supply coming in 2012 and as long as new jobs are not created to absorb the new supply, we are not likely to see any recovery," said Athmane Benzerroug, analyst at Deutsche Bank. Rental prices in Dubai and Abu Dhabi will also see a downward trend, dropping 5 percent and 10 percent respectively. Abu Dhabi, the capital city of the UAE, fared better during the downturn but is now facing challenges as a huge supply of high-end homes are expected to come onto the market. Across the oil-rich state, which accounts for more than half of the United Arab Emirates' economy, government-backed real estate, commercial and tourism projects, many conceived during the boom years of 2003-2008, are under review and in some cases being delayed or put on hold. Abu Dhabi pushed back the opening of the much talked about local branches of Louvre and Guggenheim art museums earlier this month. "In Abu Dhabi, the prices and rentals are expected to be under downward pressure due to increasing supply of housing units in the capital at a time where there (is) less demand," said Sajeer Babu, analyst at National Bank of Abu Dhabi. A median of 10 respondents in the poll said Abu Dhabi's house prices will fall 61 percent from its peak in 2008 and 14 percent from here. Four out of 10 respondents expected Abu Dhabi's house prices to fall by 15 percent and above in 2012.
