Dubai’s Palm Jumeirah Prices Plummet as Crunch Sets In
But an increase in 2009 buyer activity according to PowerHouse Properties
Property prices on the Palm Jumeirah, the island dubbed the ‘eighth wonder of the world’, have fallen by over 100 per cent since September 2008 amid fears the global credit crisis is stalling the emirate’s economy.
Four-bedroom garden homes on the Palm are now selling as low as Dh6.5 million, down from Dh14 million in September 2008 according to sales agents PowerHouse Properties.
Ian Hainey, Palm sales specialist for Dubai brokerage, PowerHouse Properties, said: “We’ve seen a steady stream of bargain hunters in the market shopping for these prestigious addresses, with many motivated primarily by price. Many end-users who previously could not afford to live on Palm Jumeirah are also now turning their attention to the bargains currently on offer.
“Palm signature villa prices have also fallen, with even the most popular styles that were selling for over Dh30 million six months ago now appearing on the market for under Dh15 million.
“However, there has been a noticeable increase in Palm Jumeirah buying activity during the month of January. Sales are still being made on the island, with an upsurge in those buying to rent, taking advantage of the bargain prices while still capitalising upon the high rental yields. Garden homes are renting at over Dh400,000 and furnished signature villas still commanding rents up to Dh1 million.”
Reports show property prices in Dubai dropped 8 per cent in the fourth quarter of 2008, the first quarterly decline since foreign ownership became legal in 2002. The report stated sales volume also dropped by 45 per cent in the last quarter, providing fresh evidence of the global credit crunch hitting the emirate.
When work started on the Palm in 2001, the villas were quickly snapped up at prices from Dh2.8 million each, with celebrity buyers including David Beckham and Michael Schumacher. The Palm Jumeirah quickly became one of Dubai’s most desired locations and prices rocketed as the hype surrounding the island grew.
As 2008 drew to a close, the decision to halt work on Palm Jumeirah’s Dh2.9 billion Trump International Tower is one of the more notable effects of the economic downturn. Nakheel has already announced delays on some of its other projects, such as aspects of the Palm Jebel Ali. There is a connection between the lack of finance available, slowdown in projects and the intense downward pressure on property prices.
Dubai-based mortgage advisor Jack Czechowski from propertyfinancelink.com explained: “There has been a marked reduction in people seeking to buy properties on the Palm Jumeirah, and therefore obtain finance, but this is true in developments throughout Dubai
“Those who are still looking to buy are finding it very challenging to obtain finance at the moment. Banks have tightened their policies, reduced lending ratios and increased interest rates. Most lenders have reduced their maximum borrowing ratios from 90 per cent to less than 80 per cent.
“Interest rates have increased from approximately 6.5 per cent to 8.5 per cent and banks will generally no longer lend to non-residents or people employed in the real estate sector. Unfortunately this is preventing many potential buyers from being able to purchase.
“It is difficult to make an accurate prediction on the immediate future, as Dubai has never faced this problem, but it is quite possible banks will review their policies early in the year.”
Middle East construction and development in Dubai has slowed down over the past few months. Reduced lending from banks and falling confidence about the future of the market have combined to slow down both the primary and secondary property market.
The Palm Jumeirah was built as the flagship part of Dubai’s ambitious ‘Universe’ development, which planned to extend Dubai’s coastline to around 625 miles, around 15 times its natural size.
