Higher oil prices and economic rebound has supported recovery
While Frankfurt, Toronto, and Hong Kong exhibited the most elevated risk levels on housing markets, Dubai was the only undervalued market, and the only one to be classified in a lower category than it was last year, according to a report by UBS.
In its Global Real Estate Bubble Index 2021, the bank said better affordability, easier mortgage regulations, higher oil prices, and an economic rebound seem to have started a recovery in Dubai's housing market.
Even before the coronavirus pandemic, a housing supply glut and lower oil prices had dampened Dubai’s property market. During the lockdown last year, job losses among expatriates led many of them to leave the emirate, adding to the downward pressure on rents and sale prices. Now, however, sales transactions have been picking up as property buyers take the recovery in business activities and prices that are still attractive.
According to an S&P report earlier this week, the rebound in the property market is also supported by high Covid-19 vaccination rates and new visa and corporate ownership rule.
“Dubai’s real estate sector will likely benefit from the World Expo 2020 which started a year late this October due to the pandemic,” the S&P analysts wrote. “But structural oversupply of residential properties will challenge price increases over the long term, making the recovery fragile.”
UBS also warned that although construction in Dubai has slowed, "essentially limitless supply poses a risk for long-term appreciation prospects.”
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