House prices in Dubai will continue to suffer this year as cheap oil and the strong US dollar push properties beyond the means of many overseas investors, according to the latest report from consultants KPMG.
The low global price of oil is also depressing the Dubai housing market, KPMG added as it restricts the ability of some potential purchasers to buy and also because it is likely to prompt governments to cut budgets, which in turn means slower infrastructure growth.
Political unrest across the Middle East and economic uncertainties in China and Russia add to the factors deterring investors from entering the market, the company, one of the Big Four financial services firms, added.
However, KPMG expects the market to start to recover in 2017 as infrastructure work surrounding the Dubai Expo 2020 gets under way, jolting the economy and driving demand for housing.
“Although 2016 could be challenging in the short term, with effective regulations in place and the infrastructure investment that is committed as part of Expo 2020, we should see an upturn in the real estate industry in 2017,” said Sidharth Mehta, partner and head of building, construction and real estate at KPMG Lower Gulf.
“When preparation for Expo 2020 picks up, we expect to see a significant amount of job creation and an increase in demand for residential real estate,” he added.
Although most property brokers agree that house prices in Dubai fell by 10 to 15 per cent in 2015, experts disagree about when the current downturn will end and the market will start to recover.
Last month the niche agency Phidar predicted a further decline in prices of up to 20 per cent through 2016 and 2017, as declining rents weaken investor returns.
But other brokers have been more optimistic.
In January, the property data company Reidin and consultancy ValuStrat both reported signs of price declines plateauing after 18 months of declines.
“Some might suggest that this is a bottoming out of the market and the only next step is for values to go up,” said the ValuStrat research manager Haider Tuaima.
“We’re not saying that at the moment, but it seems the signs are indicating that we’ve reached a predictable stage of the market. If all other economic factors are the same, we are assuming it will stay this way for the next three to six months.”
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