Dubai’s Palm Jumeirah Prices Drop 30%

One of the hottest property markets in the world is now also showing signs of weakness. Residential villas on Palm Jumeirah have dropped between 30 and 40% since September according to brokers.

The Palm Jumeirah, the artificial island created by  government owned Nakheel on the shoreline of Dubai, features hotels, villas, appartment building, beaches, marinas and retail outlets. According to Quaid Abbas, property consultant at Engel & Volkers, the price of a four-bedroom villa on the island went down from Dh15 million to Dh10m ($2.7m) in September. Buyers are having troubles to finance their purchases on the back of the global credit crisis.

Dubai Islamic mortgage lender Amlak said on Wednesday it had suspended new mortgage loans as Dubai’s property sector shows signs of collapsing.

Nakheel said earlier this week it was witnessing a slowdown in the rate of property sales and last month announced it had scaled back dredging work on its massive Palm Deira project, the largest of three palm archipelagos that is planned to house more than 1 million people.

Bank for developers?

In order to revive the slowing property sector, the government of Abu Dhabi is looking into a strategy to make funds available to developers and home finance companies, developers and officials say.

Among proposals being considered is the creation of a facility to fill the gap in lending left by banks to businesses. Many banks are issuing fewer such loans, despite the Government’s recent decision to supply Dh120bn (US$32.6bn) in emergency funding to domestic lenders. Instead of using this money to lend to companies, domestic banks have used the emergency funding to shore op their deposits that got depleted by foreigners.

One of such a facility could be the introduction of government owned property bank, where developers and mortgage companies could go for financing.

Source: The National