Dubai home sales plunge after officials move to ease volatility

The slowdown could prompt concern among Dubai authorities as the real estate industry

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Dubai home sales shrank by about two-thirds in the first half of 2015, and prices also slipped, with further declines expected over the rest of the year, property consultants JLL said in a report on Wednesday.

The real estate sector in Dubai, one of the seven United Arab Emirates, has been among the most volatile globally over the past decade, swinging from boom to bust to boom again. Home prices had recovered to near peak values last year after falling by about half from their 2008 highs, but are now again in retreat.

The plunge in home sales this year is partly due to government steps to ease market volatility - officials have upped minimum deposits required for mortgages and doubled real estate transaction fees.

But the slowdown could prompt concern among Dubai authorities as the real estate industry - which is dominated by residential properties - is one of the sectors most easily accessible to foreign investors.

On Monday, Dubai’s S&K Estate Agents blamed a deteriorating market as it filed for bankruptcy.

The total value of residential property transactions fell 66 percent to 12.7 billion dirhams ($3.5 billion) in the first half of 2015 and the volume of sales plunged 69 percent, compared with a year earlier, JLL said, citing Dubai government data.

Sales prices have dropped by an average of 8 percent since June 2014, added JLL, one of the world’s largest real estate consultants.

"We expect transaction volumes, and subsequently sale prices, to drop further in the second half of the year," said Craig Plumb, regional head of research at JLL.

Apartment sales prices fell 9 percent in the second quarter of 2015, while house sales prices dropped 5 percent.

About 16,000 units - apartments and houses - are due to be handed over by developers in the second half of the year, bringing Dubai’s total number of such properties to 395,000. But JLL said the market slowdown could lead to delays in completing projects, into 2016 and beyond.

Dubai’s tourism sector has also suffered, with hotels’ revenue per room falling 9 percent to $208 for the year to May. JLL warned that, with the number of rooms forecast to increase by nearly half to 2018-end, room rates were likely come under further pressure.

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