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Demand for properties in Dubai has dropped significantly, as the market continues to face some headwinds, analysts have told Gulf News.
Signs of a market turnaround, however, are expected to show later this year.
Quoting official data, real estate consultancy firm JLL said the number of sales transactions in Dubai posted a more than 35 per cent decline last year compared to a year earlier.
“The number of sales transactions, excluding mortgages and land, fell from 23,000 in 2014 to 15,000 in 2015, with a similar decline in the value of these sales (to Dh22.1 billion in 2015),” Craig Plumb, head of research at JLL Middle East and North Africa (Mena), told Gulf News.
“The level of sales of residential units in Dubai fell last year from the levels experienced in 2013 and 2014, with this decline being due to a combination of declining sentiment and the stronger US dollar.”
In a survey conducted in December, more than half of real estate agents reported lower new buyer enquiries. The slowdown was more marked in the apartment segment, according to Emirates NBD.
"The strong [US dollar] remains a key factor for international buyers, many of whom have seen their home currencies weaken against the greenback over the last 12 to 18 months, making Dubai's real estate relatively more expensive," the bank said in a report released this month.
"The low oil price and increased geopolitical tension in the region over the last year may also have affected investor confidence and contributed to uncertainty about the economic outlook."
Given the trends experienced over the first half of 2015, investor numbers from major markets are likely to fall further this year, including those from India, Pakistan and Russia, according to Plumb.
“The Russian rouble lost around 50 per cent of its value against the dollar in 2015, while the value of the Indian rupee declined by around 25 per cent. As a result, real estate in Dubai is considerably more expensive for investors from these countries,” Plumb added.
Khatija Haque, head of Mena research at Emirates NBD, said the strong dollar and low oil prices “are likely to remain headwinds for the real estate sector in 2016”.
Jesse Downs, managing director and co-founder of Phidar Advisory, which deals mainly with large and institutional investors, said there is indeed a drop in investor interest in Dubai.
“Compared to a year ago, appetite for Dubai real estate has decreased, primarily due to regional and global issues,” Downs told Gulf News.
“However, there is still investment demand for the right product at the right price, primarily stable income-generating assets with a healthy yield. But prices are simply not adjusting to the current market reality. Once prices do adjust, then opportunistic investment will absorb inventory.”
The fall in real estate sales, however, does not mean that Dubai’s appeal is weakening for the investors.
Data from the Dubai Land Department showed that 2015 managed to attract Dh74 billion in investments from foreign buyers in 2015. In terms of investment, size Indians topped the list, with 8,756 buyers accounting for Dh22 billion worth of transactions.
The second-biggest spenders were the 4,899 British nationals, with combined property purchases reaching Dh10 billion, followed by 6,106 Pakistani buyers with Dh8 billion.
Total real estate transactions exceeded Dh267 billion in 2015.
Source: Cleofe Maceda, Senior Web Reporter, gulfnews.com