Property prices in Dubai could fall by as much as 10% this year as a strong dollar and falling oil prices continue to weigh on demand for homes in the popular tourist destination.
Dubai’s real estate prices tumbled by around 13% on average in 2015 and Standard & Poor’s, one of the big three credit rating agencies, has predicted it is on track for another double-digit drop this year with investors plagued by macroeconomic pressures. It believes the wider UAE will also experience price falls.
“For the United Arab Emirates (UAE) real estate sector, 2015 was the first year since the recession in which prices declined,” it said. “For the coming year, we see no sign of market improvement for the UAE real estate sector.”
According to the S&P report, the strong U.S. dollar has made property in the region more expensive for international investors holding non-U.S.-dollar liquidities.Dubai House Prices on Track for Another Double-Digit Drop Click To Tweet
Pressures have also arisen from falling oil prices, dampening the hiring and expansion plans of oil-exposed companies, while the business activities of other private companies have softened.
However, it believes that developers could absorb a 10% drop in residential sales prices in Dubai this year despite these headwinds. This reflects the fact that most of their projects are pre-sold.
“We still believe that the lifting of geopolitical restrictions, such as the sanctions on Russia and Iran, could strongly benefit the recovery of the UAE property market,” it said.
“This would open new investment flows into the region’s real estate markets and partly compensate for the softening demand from other countries. A rebound in oil prices as well as weakening U.S. dollar would also likely reverse the negative trend, in our view.”
Emaar Properties, a Dubai-based developer, recently unveiled plans to build the world’s tallest tower in the Middle Eastern emirate, knocking the Burj Khalifa off its perch. While it won’t be for residential use, it may have a hotel.