(Updates with hotel property details in sixth paragraph.)
Sept. 26 (Bloomberg) -- Dubai villa and apartment prices may soon bottom out as political turmoil elsewhere in the Middle East and North Africa prompts buyers to look for less-risky investments, Jones Lang LaSalle said.
Apartment prices in most parts of the Persian Gulf sheikdom are stabilizing or declining slightly, “indicating that the market might be very near its bottom,” the U.S. property broker said in a research report today. Villa sales increased 59 percent by value even as volume fell by nearly a third, indicating that higher-priced properties are attracting the most buyers.
The renewed interest hasn’t resulted in rents or property prices increasing across the board, although some localized markets are now approaching stability, the report said.
Dubai home prices have dropped 64 percent from their peak in mid-2008 after the global credit crisis caused mortgage lending to dry up and drove speculators from the market, Deutsche Bank AG said in June. The United Arab Emirates, which includes Dubai and Abu Dhabi, has largely avoided the “Arab Spring” political upheavals that unseated regimes and disrupted investment in countries including Egypt, Libya and Tunisia.
The Arab Spring “has helped push the hotel and retail sectors into the recovery stage and selected sectors of the residential market are also improving,” Alan Robertson, chief executive officer of Jones Lang for the Middle East and North Africa, said in the report.
Dubai’s hotel market has seen the biggest benefit from the regional unrest, according to the report. Average occupancy rates rose to 78 percent in July from 60 percent in the same month two years earlier.
Hotel property prices will come under pressure as more rooms are built, though the pace of development has slowed, Jones Lang said. More than 1,700 rooms were added in the year through July, increasing the supply by about 3 percent.
Offices have been the emirate’s worst-performing property market and the least affected by the Arab Spring this year, the report said. Demand for office space may pick up in the future as companies based in Bahrain and other countries in the region search for new headquarters, the report said.
Recovery in demand could be delayed by concerns over slowing economic growth in Europe and the U.S. The completion of a further 5,000 homes by the end of this year will also add to an existing oversupply and may delay any recovery in prices, the report said.
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