Dubai home prices ‘to fall’

Residential values in Dubai have been declining since the second quarter of 2014 as weak job growth and ballooning supply drives values and rents lower.

Transactions by value dropped about 20% last year compared with 2015 as the city’s traditional investors from the Persian Gulf, Russia and the UK were hit by lower oil revenue and by the decline of their local currencies against the dollar to which the United Arab Emirates dirham is pegged.

Officially, around 70,000 homes are set for completion before the end of 2019. But only about two-thirds of those will actually be delivered to buyers in that time frame because many developers are delaying construction to restrict supply hitting the market, Mr Maclean said.

That should help cushion the declines along with stronger local demand. Property purchases financed through mortgages now make up around 48% of the total compared with about 25% three years ago, he said.

“The owner occupiers, those who want to put roots here, are a much stronger component of the market now,’’ said Mr Maclean.

Dubai, which built the world’s tallest tower and man-made islands, experienced one of the world’s worst property crashes in 2008 as speculative buyers flipped properties many times before they were even built.

Since then, the government has doubled transaction fees to 4% and the UAE’s central banks limited mortgages to encourage buyers to invest in properties through savings.

Pressure this year will not be limited to the housing market in Dubai.

Hotels are likely to experience further decline of room revenue due to rising supply and dollar strength, which makes Dubai more expensive to Russian and European visitors, CBRE said. Retailers are also expected to face challenges, it said.

Separately, senior government officials said growth in Dubai will accelerate this year even as oil prices remain low and slower trade puts pressure on the emirate.

The economy is expected to expand 3.1%, following growth of 2.7% in real terms in 2016.

Bloomberg