Foreign demand keeps Dubai property prices steady: Reuters poll

© Reuters. FILE PHOTO: An overview of residential properties at Balqis Residence, Palm Jumeirah, Dubai, United Arab Emirates, March 25, 2022.REUTERS/Christopher Pike

Author: Md Manzer Hussain

BENGALURU (Reuters) – Dubai house prices are set to rise more or less steadily over the next two years, driven by demand from foreign investors, analysts have warned of higher interest rates and a lack of affordability, according to a Reuters poll of analysts. Room may inhibit activity.

The Dubai property market has shrugged off last year’s long-term decline and has been upbeat since then, as rising energy prices and a recovery in trade and tourism fuel a rebound in the economy.

Median house prices in Dubai rose 7.5% in 2022, unchanged from the last survey conducted two months ago, according to the latest Reuters poll of 13 property market analysts from May 11-26.

Faisal Durrani, head of research at Knight Frank Middle East, said the market sentiment, buoyed by the easing of the outbreak, “combined with the success of the Expo, the reopening of tourism corridors…continues to support the market’s rebound.”

The emirate’s real estate sector had its best quarter in more than a decade, with sales transactions in the first quarter reaching the highest level since 2010, data from the Dubai Land Department showed.

However, price growth is expected to slow to 4.5% and 3.0% in 2023 and 2024, respectively, bringing stability to the market.

That’s in stark contrast to several other housing markets that have experienced dizzying highs.

“What we saw last year was more of a recovery from the pandemic; this year appears to be slowing to healthier growth,” said Haider Tuaima, director and director of real estate research at ValuStrat.

When asked what will drive Dubai’s real estate market this year and next, 11 out of 13 respondents indicated demand from foreign investors. Second, choose the local demand.

These expected price increases, even modest ones, will pose challenges for first-time buyers as interest rates are expected to climb, hurting affordability.

Prices in the Dubai market remain well below their last peak in mid-2014 and face some downside risks such as rising interest rates, a lack of affordable housing supply and inflationary pressures this year and next.

All but one of the 12 analysts who answered additional questions said affordability for first-time buyers will worsen in the coming years.

A two-thirds majority also said rents in Dubai, which has a large expat population, will become unaffordable in the next two years.

“Those who want to buy will be squeezed out of the market and will be forced to continue renting. Rents have and will continue to increase, demand will increase, and without affordable housing, this will lead to an increase in the overall cost of living,” said Allsopp and Allsopp’s Lynnette Sacchetto, director of data and digital transformation, said.

(Additional coverage on Reuters’ quarterly housing market survey:)

(Reporting and polling by Md Manzer Hussain, Editing by Hari Kishan, Ross Finley and Louise Heavens)

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