Dubai Leads Global Housing Slump

DUBAI, UAE - Dubai, home to the man-made Palm Jumeirah and World island developments, suffered the biggest reversal among global housing markets following the collapse of an investment bubble, Knight Frank LLP said. House prices in Dubai, the second-largest of the seven sheikhdoms that make up the United Arab Emirates, fell 32 percent in the 12 months ended March 31, according to a report by the London-based property broker published today. A year earlier, homes appreciated at an annual rate of 48 percent.

Dubai "is in a mess," said Nick Barnes, head of international residential research at Knight Frank. "A lot will depend on developers and how long they can hold on before getting into fire-sale territory."

The sheikhdom was hurt more by the global financial crisis than other property markets because of the construction boom that created thousands of new homes just as demand began to evaporate. Within a year, Dubai went from being the fastest rising of 46 markets monitored in the Knight Frank global house- price index to the second-biggest decliner after Latvia.

Deyaar Development PJSC, the Dubai-based company that put a quarter of its projects there on hold, will announce a 500 million-dirham ($136 million) property fund to buy distressed assets within three weeks, Chief Executive Officer Markus Giebel said in an interview on May 14.

In the first quarter of 2009, house prices in Latvia dropped 36 percent, while Singapore was the third-worst performing market with a slide of almost 24 percent. They were followed by the U.S. and the U.K., where prices declined about 17 percent.

The biggest increase in property values tracked by Knight Frank was for Israel, where homes appreciated by almost 11 percent. The Czech Republic and Jersey came second and third respectively, the broker said.

"In Israel, demand still outweighs supply," said Werner Loval, founder of Anglo-Saxon Real Estate, an Israel-based property broker. Israel's largely Jewish foreign buyers are motivated "more by sentiment" than by speculation, he said.