Following the downward spiral in the Dubai property market, there had been some hope of a recovery in 2017. The optimism surrounding the market has fallen off in recent months – and with no recovery in sight, new problems are arising for the sector. From falling prices to oversupply, Dubai’s property market is not showing signs of recovery for anytime soon.
Previous hopes dashed
Dubai has seen predictions of a property rebound miss the mark repeatedly over the last two years. Optimism about a recovery has given way to quiet resignation that the slump may persist for two to three years. This comes after oil price increases – key to the emirate’s economy – failed to spark the expected jobs boost.
One of the analysts, who expected a big pickup in homeownership demand last year, identifies the key weaknesses in the property market preventing this. Speaking to Arabian Business, Mohammad Kamal at Arqaam Capital Ltd says: “The amount of property bought for investment purposes and now listed on the secondary market is quite substantial… That suggests that buying right now won’t result in a resale later and that’s keeping people away.’’
Bad news for now
Following this, falls in prices have been seen across Dubai. Residential rents fell between 10% to 15% last year, according to reports made by Bloomberg. Selling prices declined also, however at a slower pace. According to a report by S&P Global Ratings published in February, we can’t expect to see any changes soon. A recovery isn’t likely before 2020, when Dubai is set to host the World Expo.
In addition, transactions of completed homes last year were 24% below the 10-year average, according to Phidar Advisory. Despite developers’ attempts to delay the delivery of properties already sold, supply growth is outpacing demand for rentals. Less than half of the properties sold in advance by developers were delivered in the three years through 2017.
Worries for developers
While the property market in Dubai might not be picking up anytime soon, Dubai is still expanding. Despite attempts by developers to delay the completion of properties, the pipeline of sold apartments and villas is still outpacing current demand considerably.
Earnings for the city’s developers reflected the challenges. Speaking to Bloomberg, Sanyalak Manibhandu, an Abu Dhabi-based Equities Analyst at Fab Securities comments: “they all missed estimates. That’s because analysts were too optimistic or because the situation got worse in the latter part of the year.’’
As Dubai moves forwards, it is still hoping to find the elusive rebound that could save their property market.
About Samir Salya
Samir Salya is the Chairman of Reign Holdings and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.