CEO of Dubai developer Deyaar says prices at a ‘bottom phase’ but recovery could take time

Dubai property chief believes prices near bottom

DUBAI, United Arab Emirates — Dubai’s battered real estate prices have nearly bottomed out and should start to recover, but probably not until at least next year, the head of one of the troubled emirate’s most prominent property developers said Monday.

Prices in the Mideast sheikdom dropped by half in less than a year from their peak in late 2008 as overseas buyers, many of them speculators relying on easy credit, fled the market.

The unexpectedly steep plunge led to widespread job cuts and contributed to Dubai’s financial problems by depriving many local developers the cash they needed to pay the bills and cover debts racked up in a torrid building boom.

Deyaar Development Co., Dubai’s second biggest listed developer, was among those hurt by the downturn.

CEO Markus Giebel told reporters Monday that while he does not expect a dramatic recovery in Dubai’s property market, prices are unlikely to fall significantly further.

“Dubai has reached a bottom phase,” Giebel said. “I cannot tell you if it goes 5 percent up or down. But I’m very certain it will not go 20 or 30 percent up or down in the next year.”

Giebel said he expects prices will fluctuate in a narrow range before possibly starting to recover in 2011.

Unlike some other Dubai firms, such as troubled island-building developer Nakheel, Deyaar is not owned outright by the emirate’s government, though the state does have an indirect stake.

Deyaar last week said its 2009 profit dropped 95 percent to 30 million dirhams ($8.2 million), as sales fell and the company booked impairment charges and made other accounting adjustments.

Giebel said Deyaar planned to move beyond primarily developing luxury high-rises to focus more on specialized markets and low-income housing, which is scarce in Dubai. It also is looking to expand to other parts of the Middle East, including Saudi Arabia, Bahrain and possibly Iraq.

Deyaar currently owes its contractors less than 100 million dirhams ($27.3 million), much of it overdue, but is working to clear those debts, Giebel said.

Dubai is struggling to get out from under more than $80 billion in debt. Much of it was amassed by state-linked developers during a building boom over the past decade that transformed the once-sleepy emirate into a bustling business and tourism hub populated largely by foreigners.

That property boom has left the city-state with a glut of new skyscrapers and man-made islands, most of which now sit empty.

Analysts, however, say a recovery could still be far off.

Los Angeles-based commercial property giant CB Richard Ellis said earlier this month the Dubai market remained sluggish through the end of 2009 and showed “few signs to suggest any imminent upturn in fortunes.”

Another firm, Dubai-based Landmark Advisory, expected house prices in the emirate will stagnate as apartment values continue to fall.

“We predict apartments will decline as much as 20 percent over the next 18 months,” analyst Jesse Downs and colleagues said in a report last week.