House prices in Dubai have dropped by 41% in Q1 2009.

House prices have dropped by 41% in the first quarter of 2009, according to the Colliers International House Price Index (HPI).

The impact of the global economic downturn on Dubai’s residential property market in Q4 2008 saw the initial indications of a downturn emerging when the index recorded an average decline in house prices of 8% over the quarter – Q4 having been supported by and taking into account positive overspill from transactions that occurred late in September. Despite this drop, average prices overall had still risen by 59% over the previous 12 months (year-on-year results).

The results for Q1 2009 show an 82 basis point decline from 199 to 117 points, which represents a 41% drop from Q4 2008. Also for the first time since the inception of the HPI, it shows a reduction in the year-on-year statistics, with a decline of 34% in house prices overall since Q1 2008 – prices are currently at approximately Q2 2007 levels. Transaction volumes for new mortgage requests and therefore acquisitions declined sharply compared to previous quarters.

There was also a significant fall in the volume of ungeared (cash) transactions and properties being refinanced but not to the same degree as new mortgage applications.

The Colliers International House Price Index (HPI) was established in January 2008 by Colliers International UAE and six leading banks/financial institutions in the Emirate of Dubai.

The member banks/financial institutions associated with the Colliers International House Price Index are: HSBC Bank Middle East Limited, Barclays Bank PLC, Amlak Finance PJSC, Dubai Islamic Bank PJSC, Emirates NBD and Abu Dhabi Commercial Bank (ADCB).

There is further evidence that Dubai’s property market is suffering; earlier this month (22 April), Swiss bank UBS predicted that Dubai house prices will fall by up to 70% from their peak levels in the fourth quarter of last year, and ICM has also previously reported on empty office space and hotel rooms in Dubai - http://news.icm.ac.uk/business/empty-buildings-and-hotel-rooms-in-dubai/898/.