DUBAI: Dubai house prices climbed 2 percent year-on-year in the first quarter, their first annual rise since the 2008 financial downturn, but oversupply would pressure prices going forward, Colliers International said on Sunday.
Prices in the Gulf Arab emirate, home to the world’s tallest building, rose 4 percent in the first quarter from the previous quarter. That marked the third consecutive quarterly rise, Colliers said, in a sign that the property market is stabilizing.
House prices in Dubai have slumped some 55 percent since their peaks in the third quarter of 2008.
"There will be significant oversupply in the market by the end of the year so it is anticipated the index will experience fluctuations going forward," said Ian Albert, the firm’s regional director, referring to its house price index.
"What will be important to watch is how much of the supply matches the end-user demand for community-oriented developments," he added.
Colliers International estimates that 41,000 homes will enter the market by the end of 2010, mostly in the low to mid-income segments.
It said that while demand is not expected to match the supply growth, it remained unclear whether future supply will have a negative impact on established projects, which are typically more resilient to market conditions.
Albert added that while banks are starting to lend again, it was unlikely that all of the supply would meet new and stricter lending criteria.
Apartment prices in Dubai rose 6 percent in the first quarter from the previous quarter, villa prices climbed 2 percent while townhouse prices fell 4 percent, the index showed.
House prices and rents are set to fall 10 percent more in 2010 and not recover until 2012, a Reuters poll showed in April.