* UBS says expected price slide may happen quicker
* Concerns over availability of finance
By Jason Benham
DUBAI, Nov 29 Dubai's property market is likely
to face further price falls and increased concerns over the
availabilty of finance after the emirate said it would delay
debt payment issued by two of its flagship firms, analysts said.
Dubai rocked the financial world on Nov 25 when it said it
would ask creditors of Dubai World, the conglomerate behind its
rapid expansion, and Nakheel, builder of its palm-shaped
islands, to agree to a standsill on billions of dollars of debt
as a first-step to restructuring.
"The news plays on investor psyche and house prices may
slide a further 20-30 percent earlier than our existing view of
second half of 2011," said Saud Masud, UBS' head of research and
senior real estate analyst, Middle East and North Africa.
"There may likely be further job cuts as a result of any
potential restructuring, and that could directly impact
population outflows and result in housing oversupply."
State-run Dubai World had $59 billion of liabilities as of
August, a large proportion of Dubai's total debt of $80 billion
and repayment of Nakheel's $3.5 billion worth of Islamic bonds,
which were originally due to mature on Dec. 14, was widely
expected by the market to be met.
"I think residentially there will be an impact. There will
be uncertainty over liabilities for that group going forward and
that will impact pricing," said Nicolas Maclean, managing
director at real estate services firm CB Richard Ellis
"But if you hold property in an unrelated developer, there
may be only be a knock-on effect short-term," he added.
A number of reports published by analysts recently have
suggested that conditions in Dubai's real estate, where prices
have fallen some 50 percent since their peaks last year, were
Colliers International said in a report earlier in November
house prices rose 7 percent in the third quarter, posting their
first rise in a year. [ID:nL3514597]
"The real concern is what further provisions banks will have
to make and their ability to put liquidity into the market in
2010, in terms of mortgages and development projects," the
firm's regional director Ian Albert said, adding the increase in
activity in the third quarter was substantially brought about by
the availability of liquidity returning to the market.
EFG-Hermes however said it kept to its forecast of a
recovery in house prices in late 2010.
"Recently, it has been more local demand, not foreign demand
that has been driving transaction activity. Moreover, we believe
the volume of supply expected to come on stream has been over
magnified," said Sana Kapadia, vice president of equity research
at the bank in Dubai.
EFG expects on average 20,000 new homes between now and
2012, with actual supply delivered to be toned downwards, given
the slowdown in construction and underlying liquidity issues,
(Editing by John Irish and Mike Nesbit)
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