Dubai property market turns to sand

Rents in Dubai have plunged 20% in just the last six weeks, the subsidiary of a British lettings agency has reported, putting the UK situation into perspective.

In:Style Real Estate, part of Benham and Reeves Residential Lettings, which has nine offices in London as well as two others in Hong Kong and Singapore, is the latest to report on the Dubai market which has crashed spectacularly fast – and far.

The United Arab Emirate had been one of the few places in the world to have a booming housing market – until the tail end of last year. Suddenly, agents were admitting that they had not sold a property for six months, and developers were halting work.

Many Dubai property owners are Britons, lured by the mixture of glitz, shopping and surreal themed developments set in a desert environment where camels are still in everyday use.

Property prices in Dubai have been priced well above what the local population can afford, with residential units aimed at the international community. Almost 100% of these purchasers have bought off-plan, pledging down-payments up to three years upfront, with most schemes – built by cheap foreign labour – way behind schedule.

With falling prices in Dubai and recession in Britain, many UK investors have not completed on apartments, or have tried in vain to sell them.

But now Anita Mehra, managing director of In:Style Real Estate, says the crash has spread to the rental market and that owners who had hoped to sell will struggle to let out their units.

She said: “In the past six weeks, rents have gone down 20% in Dubai. A few months ago, tenants would have to decide almost immediately whether to take a property or risk losing it to someone else. We were taking on apartments in developments such as Jumeirah Beach Residence and Damac Lake Terrace and renting them within 24 hours.”

But now people are taking up to a week to decide on tenancies, she said.

Meanwhile, a proposed new law to protect future property investors in Dubai is being considered. Developers would not be allowed a licence to sell off-plan unless the land has been 100% paid for, and no licence will be granted unless 20% of the scheme has already been built.