Dubai property market becalmed in final quarter of 2014

on Jan 30, 2015

During 2008/09, Dubai experienced a crash in property prices as did many other property markets. In that period, prices fell by almost 50% and although such a crash is not expected in 2015, a strong dollar combined with the dramatic fall in the price of oil is expected to have a knock-on effect on property values in the United Arab Emirates’ most populous city.

With Dubai real estate prices having stabilized in the last quarter of 2014, investors are increasingly moving their capital into hospitality properties, with a view to benefiting from higher yields. Alan Robertson, chief executive of the Middle East North Africa (MENA) office of property consultancy Jones Lang LaSalle says:
“The change we have seen is that investors now want a little bit more return for their money than they did six months ago or 12 months ago.”

For the most part, commentators expect that investors taking a more tentative approach towards the market in Dubai will have a negative effect on the value of transactions throughout 2015.
Taking account of mitigating external factors, the International Monetary Fund has lowered its forecast for economic growth in the UAE, mainly due to a drop-off in oil prices which is expected to account for £300 billion in lost profit for the oil exporting countries of North Africa and the Middle East.

In tandem with the loss of oil revenues, a decline in historically robust inward capital streams looks likely in 2015 as investment sentiment from Russia and Europe continues to diminish, with the potential to further deflate Dubai’s property market.
An anticipated increase in housing supply this year may lead to a slump in the residential property market. That said, there has been significant population growth in Dubai which may enable the housing market to absorb the increase somewhat.
Ordinarily, the Dubai real estate market is regarded as one of the world’s most exclusive, with prices beyond the reach of many retail property investors. Whilst it remains to be seen just how far real estate prices might fall in 2015, Dubai could begin to offer hitherto unseen opportunities to property investors. As per usual though, the timing of any investment in Dubai property will likely be crucial in realising potential profit.

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