Prices and sales continue downward in Dubai
Residential property prices in Dubai continued to fall in the third quarter of 2015 continue to decline and sales are also falling, the latest published data shows.
The Phidar Dubai Real Estate International Demand Index (REIDI) fell significantly in the first half of the year, which, according to the firm is driven primarily by currency fluctuations.
According to Jesse Downs, managing director of Phidar Advisory, there is a lower level of international buyers coming to the market and this is related to currency exchange.
She pointed out that in the first half of 2015 the midpoint exchange rates for all currencies included in the REIDI are down against the dollar compared to 2014, except the Chinese Yuan and Hong Kong Dollar.
‘This is not a measure of actual capital flows, but a real time indicator intended to assess the propensity for attracting capital inflows into Dubai real estate,’ she added.
Sales volumes for apartments and single family homes were down in July compared to the previous month, but up compared to July 2014. However, Downs said that this is likely due to seasonal travel patterns shifting around the holy month of Ramadan.
Overall in the first half of 2015 apartment transaction volumes were up 3% compared to the same period in 2014, but transactions for single family homes, also referred to as villas, were down 3.2% compared to the first half of 2014.
Apartment lease rates decreased a nominal 0.4%, while sale prices decreased 2.7%, pushing yields up to 7.4%. Lease rates for single family homes decreased 1.3% and sale prices decreased 2.6%, which pushed yields up to 4.8%.
‘The increase in yield is a positive and necessary trend in Dubai real estate. Especially in the context of global volatility, this is part of a healthy and necessary, market correction,’ Downs said.
But she believes that the most significant finding was in a statistical analysis of the relationship between currencies and Dubai real estate prices.
‘Analysis reveals a significant relationship between three key foreign currencies and Dubai real estate prices. Unsurprisingly, the key currencies are the Indian Rupee, the British Pound and Pakistani Rupee. Changes in Dubai property prices appear linked to fluctuation of these currencies. So, currency trends may help us to understand and forecast local property prices,’ she concluded.