Has Dubai’s Property Market Hit Rock Bottom?

Predicting or even accurately analysing Dubai’s property market isn’t an exact science. With a volatile market subject to changeable factors such as the strength of the US dollar, political and economic uncertainty around the world and, of course, the oil market, trends can vary almost month by month.

It is fair to say, though, that it has been a rough ride for property in Dubai over the past two years, with some market sectors suffering price drops of over 40%.

The predictions for its immediate future are somewhat mixed:

Analysts optimistic

Auditing, tax and advisory giants KPMG paint an optimistic picture of the Dubai market, predicting an upswing in 2017. It identifies the demand for affordable housing – which has tended to be a more stable sector of the market anyway – to be a driver towards property price and demand recovery.

KPMG expects more affordable housing to come onto the market at prices that will compete favourably with renting, tempting more buyers into the market. After the financial problems experienced worldwide in 2008, the Dubai property market had safeguards put into place such as mortgage caps and the establishment of the Al Etihad Credit Bureau (although not all UAE banks have reportedly been using this organisation’s credit reports).

This has already helped to temper the uncertainty in the property market but may prevent it being quite as susceptible to variables such as oil prices and currency fluctuations in the future.

Leading Middle East advisory service providers ValuStrat broadly agrees with KPMG. It tracks property prices in various different sectors and have found prices have generally stabilised since the summer of 2015 with, in some sectors, a strengthening of demand.

Apartments are outperforming more expensive villas, backing up KPMG’s analysis of a healthier demand in the more affordable property sectors. For example, in the second quarter of 2016 the Dubai Land Department (DLD) saw an increase in transactions of 14% for apartments double the 7% for villas.

Brexit a possible factor

Property broker JLL tempered the above optimism by forecasting that the UK’s decision to leave the EU may set the Dubai property recovery back by a minimum of six months. JLL had previously predicted that a property recovery would begin early in 2017, but it now says that the recovery will be delayed – pointing to the fact that British nationals are the third largest group of foreign investors in the Dubai property market.

Brexit will clearly now be a factor in international markets performance; for example, financial trading experts such as IG even have their own dedicated Brexit section as a sign of the importance of the referendum fall out.

Less optimistic views

Ratings agency Standard and Poor (S&P) also doesn’t see grounds for optimism for the remainder of 2016 or 2017. S&P takes a ‘straw poll’ by tracking bonds issued by three UAE developers. It says that low oil prices and a strong dollar will keep property prices low.

It’s worth mentioning that S&P came to its conclusions based on predictions from property brokers and conferring with the property companies it tracks rather than analysing Dubai property prices.

International property consultants and estate agents Cluttons predict an increase in job creation and thus the number of new buyers entering the market. This is in no small part likely to be due to Dubai hosting the mammoth Expo 2020, which should create plenty of opportunities in the coming years.

Who to believe?

In general, larger analysts see an improvement to the property market by early 2017. Through it all, it’s significant that the more affordable area of the Dubai property market has remained relatively stable – pointing to where the bulk of the demand lies at the current moment.