New report says that despite increase in sales volumes, Dubai's real estate market is unlikely to rebound in short term
Dubai's real estate market is undergoing a "false start" where despite sales volumes increasing, a recovery is still unlikely in the short-term, according to a new reort.
Phidar Advisory released its Dubai residential research note with March data which showed nominal to moderate quarterly price and rent declines and projects further softening.
“The market is undergoing a false start now,” said Jesse Downs, managing director of Phidar Advisory. “Apartment sale prices declined only nominally this quarter and volumes increased, which could be mistaken for an impending recovery, but the market fundamentals still do not support this in the short-term,” she added.
According to Phidar, in the first quarter of 2017, quarterly apartment lease rates declined 2.5 percent, while sale prices declined 0.5 percent, based on a three-month moving average of the Phidar House Price Index.
The report also said that villa rents decreased 2.9 percent and sale prices declined 5.4 percent in the same period.
“After eroding through the end of last year, villa yields have started to expand and now apartments need to go through a similar correction,” said Downs.
“Rents continue to decline due to weak demand and changes in housing budgets, which will have the starkest impact on high income housing.” she added.
In Q1, Phidar’s Dubai Real Estate Investment Demand Index REIDI decreased by 20.4 percent compared to 2016, driven by exchange rate fluctuations and downward revisions in GDP forecasts.
In the first quarter, the US dollar – and therefore UAE Dirham – strengthened against 9 of the 14 floating currencies included in the REIDI, compared to Q4 2016.
“It is unsustainable to have yield erosion amid rising debt cost and liquidity constraints,” Downs said. “As interest rates creep up and banks likely impose tighter lending standards, residential volume and prices should decrease.”
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