The strength of GCC investment into Dubai real estate last year also demonstrates the continued desirability of the emirate as an investment location and arguably the most sought after investment destination in the region. This was clearly reflected in Cluttons’ recently completed 2016 Middle East Private Capital Survey, which saw Dubai emerge as the Middle East and North Africa’s number one property investment destination for 14% of GCC’s High Net Worth Individuals (HNWI).
Paul continued, “With the market still evidently working its way through a challenging period, with global economic conditions and affordability challenges, which are in part linked to the Federal Mortgage Caps, an immediate recovery in values appears unlikely, particularly as uncertainty around commodity prices, which have a direct impact on liquidity levels in the UAE’s banking system, remains in flux.”
Rental Market
Cluttons data also shows that, Dubai’s rental market remains more resilient than the sales market, with less severe declines in rates. During 2015, rents across Dubai’s freehold residential areas declined by an average of 1.3%. Q1 2016 registered a further 2.7% drop in rents, which has dragged the annualised rate of change down to -3.5%.
In contrast to the sales market, the report states that villa rents have shown greater stability, slipping by 1.8% in Q1, leaving them 2.8% down on the same time in 2015. Apartments on the other hand have registered a fall of 4.1% in rents during the first quarter of 2016, leaving them 4.7% below where they were at the end of Q1 2015.
According to Durrani: “It is our expectation that rents will decline in general by a further 3% to 5% this year, on average, with the top end of the property spectrum seeing more significant corrections of 5% to 7%. Weakness in the jobs market tops our list of concerns, particularly if there is a spill over into sectors beyond finance and banking, which is already seeing a growing trickle of redundancies.”
Paul concluded: “As Dubai’s economy becomes more intertwined with the global economy, it will be influenced to greater extent by events in the international arena. With further weakness expected in China and the EU, a turn-around in global growth is unlikely this year. As we have stated previously, the impact of the World Expo is yet to materialise and is likely to impact the rate of job creation, which will have positive ramifications for both the sales and rental markets in the city; however this is not expected until around 2018.”
