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Date: 03/12/2008

Colliers International delivers Dubai House Price Index for Q3 2008

Colliers International, the global real estate consultancy, today released its Dubai House Price Index for the third quarter of 2008.

The report indicates an increase of 5% in the overall house price growth during July to September. The year-on-year overall growth between Q3 2007 and Q3 2008 was 80%. When compared to the same quarter a year before, the overall growth in prices was stronger at 5% compared with 2% in Q3 2007.

The 5% overall house price increase remains significant given the impact of the international financial crisis on other markets. However, since the start of 2008, the index indicates the development of a trend towards a deceleration in the rate of growth, with average overall growth registered as 43% in Q1, 16% in Q2 and 5% in Q3. Colliers expects this trend to continue into the fourth quarter of 2008, which would herald a drop in overall residential property prices.

Ian Albert, Regional Director for Consultancy Services, Colliers International, explains:

'On the one hand, the index results show a 5% increase in overall residential prices for the third quarter, which is good news. On the other hand, over the past three quarters the rate of growth has slowed to the point where we expect overall price growth to enter negative territory in the fourth quarter.'

Albert continued: 'It is clear to us that the landscape has changed since the end of September. The deceleration in the rate of growth seen in the first three quarters is attributable to the demand-supply dynamic of Dubai, but since the end of September a new factor, namely a shortage in liquidity caused by the international financial crisis, has impacted the market. It will only be possible for us to accurately advise how much of an impact when we release our 2008 4th Quarter Dubai House Price Index in mid January 2009.'

Justifying the release of the third quarter report Albert said: 'Transparency of market information is important for supporting the long term stability of property prices in Dubai. Naturally, people are thinking about what will happen in the future, but Colliers believes accurate information, be it retrospective or immediate, is relevant and important for investors and the general public to aid informed decision making.'

The Colliers report attributes the overall appreciation of Dubai's residential properties in Q3 to three main factors: the attractiveness of ownership in light of increased rental rates, the demand-supply dynamic for completed projects, and competitive mortgages with low interest rates during the third quarter.

Colliers analysis indicates the trend of deceleration in the rate of overall price growth was attributable in the third quarter to a number of factors, including the seasonal lulls due to the summer vacation and the Holy month of Ramadan, investors selling in Dubai to buy property in home countries heavily affected by the credit crisis, and negative sentiment exerting pressure on prices. The roots of this negative sentiment was the international financial crisis, as the global financial system was buffeted by shocks, and the heavy losses of real estate companies on local stock exchanges which raised doubts over their ability to complete projects.

Key Findings:

• A quarterly upward change for the overall index of 5% in Q3 2008

• The rate of growth decelerated from 16% in Q2 2008 to 5% in Q3 2008

• A year-on-year increase for the overall index of 80% between Q3 2007 and Q3 2008

• The blended average rate per ft2 for residential property in Dubai in Q3 2008 was Dhs1,919 (Dhs20,656 per m2)

• Apartments represented 69%, villas 16% and townhouses 15% respectively of total mortgaged properties used to collate the index

• Townhouse prices increased by 103% in Q3 2008 compared to Q3 2007

In order to separate the true nature of property transactions the House Price Index provides information on average square foot prices for completed and uncompleted properties and is calculated including and excluding Burj Dubai, a development that has a large influence on the index.