Property prices still falling in Dubai and likely to continue downward
Residential property prices in Dubai continued to drop in the third quarter of the year and further declines are expected, according to the latest research note.
Apartment lease rates fell by 3.4% and sale prices declined 4.1%, while lease rates for villa fell 1.8% and sales were down 4.8%, the data from the Phidar House Price Index shows.
‘There is a mismatch between the supply being delivered and new demand. Indicators suggest companies are hiring for junior and mid-level positions, but much of the new supply handed over in the second half of 2016 is positioned for mid-high to high income households,’ said Jesse Downs, Phidar managing director.
Phidar’s Dubai Real Estate Investment Demand Index REIDI, a composite of currencies in germs of each country’s total contribution to real estate investment demand, decreased by 8.9% quarter on quarter and has now fallen by 9.1% since 2015, which Downs said has been driven primarily by exchange rate fluctuations.
She pointed out that in the first nine months of 2016, the US dollar and the UAE Dirham strengthened against 11 of the 14 floating currencies included in the REIDI. The remaining three floating currencies increased against the dollar with the Australian dollar up 0.9%, the Euro up 0.6%, and SGD up 1.6%.
Downs believes that slow demand growth remains the immediate barrier for price recovery. ‘Weak demand combined with moderate supply growth will lead to further rent and price atrophy, likely into and possibly through 2017,’ she explained.
‘The strong US Dollar, low oil prices and weak occupier demand remain a barrier to recovery in 2016. In 2017, the biggest challenge may become supply and we do not expect stabilization until the second half of 2017,’ Downs added.