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Dubai real estate asking prices still unrealistic

 The four-way merger of Dubai property companies led by Emaar Properties, and the Nakheel led consolidation of Dubai World property interests is major progress towards sorting out the mess left by the Dubai real estate crash at the corporate level.

But down-on-the-ground in the property marketplace another problem is inhibiting recovery, aside from the continual dumping of massive amounts of newly completed property onto a declining market: sellers are still not being realistic about their asking prices.

Boom-time price levels

It was ever thus: people fall in love with their own properties and even more with the peak valuations of a boom. They are therefore reluctant to part with them for anything less than a good price, and so keep them on the market at unrealistic prices for far longer than is good for them or for the market.

That is the situation in Dubai right now. Meadows villas that sold for Dhs5.8 million a year ago are touted for Dhs4.5 million; three bed Springs for Dhs3.1 million; Shoreline apartments for Dhs3.6 million, only Dhs500,000 down on a year ago; and so it goes on, and they will all remain unsold as they have now for nine months.

Taking stock

Perhaps the sellers ought to take stock now that the even quieter summer months are upon us. What is the outlook for house prices now? Are we to believe the green shoots of recovery seen in a recent HSBC survey and think about the oil price upturn? Or fret about the massive amount of upcoming property completions?

Unless you think supply and demand are not what actually sets price levels then over-supply is what should be worrying you most. It is very obvious to even the most casual observer that at least in certain market segments, a very large amount of new property is about to be delivered. The impact on prices should be self-evident, especially with demand for property down and rental prices plummeting.

Hence the argument for being realistic with asking prices right now is a matter of common sense. In a declining market holding out for a high price is the stuff of fools.