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Dubai property market halts slide and prepares to start the climb back

Thursday 1st June 2017

Written by Roy Weatherby, The Overseas Investor

As a global city, its many attractions have been unable to protect the Dubai property market from feeling the effect of a worldwide malaise. Over recent months, it has been on a steady downward slide, albeit a gentle one. Understandable nerves were counterbalanced by the sense that the economic strength of Dubai meant that any contraction in the housing market was only ever going to be limited and temporary. 
The fact that house prices have essentially stabilized in quarter one supports the latter view, which then raises the closely-related questions of whether the slide has now finally stopped and at what point the recovery will start.
The market is currently wobbling rather than sliding overall
As is so often the case in large, urban areas, the Dubai property market is really a collection of sub-markets all located within the same geographic area. Hence the overall picture is essentially the sum of various, individual parts. Some of these parts are showing signs of recovery, while others are still rather in the doldrums. 
In particular, the prime residential market remains sluggish. Given that this sector, by definition, is one which would typically generate the highest-value sales transactions; it’s hardly surprising that the lack of activity in this segment acts as a brake on the market as a whole.
The currency market has placed a damper on transaction levels
Dubai is very much an international city and as such international investors are a meaningful factor in its property market. Over recent times, both the US dollar and the UK pound have both lost value on the global currency markets. 
This has meant both that property in Dubai has become effectively more expensive to international buyers who mainly operate in USD and that property in the USA and the UK has become more affordable to international buyers who mainly operate in other global currencies. Taken together, these factors have squeezed the Dubai property market, lowering demand and hence contributing to the slide in prices.
Managing the transition back to a long-term positive trend
In simple terms, the issues currently slowing down the Dubai property market are macroeconomic ones, which are slowing down many major economies around the world and hence its behaviour is following a similar pattern to other global cities. 
There is, however, one very distinctive characteristic of the local market, which is that it has a relatively high supply of new-build properties. 
The initial response to the early signs of a slowdown was for developers to begin to lower prices, which allowed some renters to buy their own homes and hence reduced the pool of renters, with a corresponding impact on rental yield. 
Developers are now, however, realising that their best approach is to stay calm and to manage supply proactively so that it stays in line with demand and hence supports the sort of pricing level typical of the Dubai property market. 
To this end, they are now adopting a phased-delivery approach, which has previously been successful in addressing issues of excessive supply during previous market contractions. Given that this strategy has worked so well in the past, it is reasonable to assume that it will work again, although it is still very much an open question as to when it will begin to take effect. 
For more information or to browse a range of Dubai property investments, please contact Hopwood House.

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Editorial Contact Details - Conor Shilling
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