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Dubai: The prices of houses in Dubai dropped by an average of 8 per cent between October and December 2008 despite a year-on-year price growth of 59 per cent between fourth quarter 2007 and 2008, a global real estate consultant has said.
According to real estate consultancy Colliers International, the fourth quarter 2008 house price index (HPI), a measure of residential real estate performance in Dubai, shows that the overall average price level is similar to that recorded at the beginning of Q2 2008.
Colliers says the index will help investors benchmark investment values over a period of time.
The analysis attributes a combination of tighter liquidity and negative sentiment as the key factors for the price drop.
According to the report, Q4 2008 saw many lending institutions reduce their loan-to-value ratios available to mortgage seekers and adopt a more selective view towards applicants.
International exchange rates also played a role, as the decline in the value of major currencies made dirham denominated assets more expensive and discouraged some international investors.
While negative sentiment, precipitated by the global economic crisis, the postponement of developments by large government-backed developers and concerns over job security further deterred potential property investors as they await signals that the market has bottomed.
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