A survey of real estate market analysts predicted that housing values in Dubai will increase this year and the following year more slowly than previously anticipated because weaker international demand will be caused by higher mortgage rates or the cost-of-living dilemma.
Dubai’s real estate market recovered swiftly from 2020’s severe collapse thanks to an economic recovery driven by increased oil prices, and buyers snapped up luxury apartments when the emirate quickly relaxed pandemic limitations compared to a majority of other cities globally.
An abundance of residential homes and rising interest rates, according to the majority of real estate analysts surveyed, will put pressure on prices in the upcoming months.
According to the consensus prediction of 10 real estate analysts surveyed between August 15 and September 2, home price increases will moderate to 6.5% in 2022 & 3.0% in 2023, down from 7.5% and 4.5%, respectively, in a May poll.
This forecast contrasts sharply with predictions for declining home prices in other global real estate markets including Canada, Australia, and New Zealand for this year and the following year.
The demand for residential homes has increased to an all-time peak this year, but Haider Tuaima, director & head of real estate assessment at ValuStrat, warned that this trend can reverse due to the increasing cost of living, rising mortgage rates, and projected new supply.
Prices for smaller apartment units have already stabilised in places where there will likely be a lot of new supply, and growth will likely be negative for the foreseeable future.
This once-hot real estate market has been saved by an excess of properties from prior years that have kept affordability in check.
Several other significant real estate markets are battling out-of-control home price inflation.
On a range of 1 to 10, from extremely affordable to extremely expensive, respondents were asked to evaluate the level of Dubai housing prices. The average response was 6.
Due to the fact that Dubai is still a buyers’ market, developers won’t raise prices significantly. According to Anuj Puri, chairman of ANAROCK Property Consultants, affordability may last for a while.
In fact, Puri continued, the market has not recently pushed for greater pricing because there was an overstock in many of the places.
Prevailing reduced prices have rendered the Dubai market appealing for both overseas and domestic investors as well.
However, Asteco Property Management, Property Monitor, Deloitte, ValuStrat, and Morgan’s International Realty claimed that for housing to become more accessible, typical home prices would need to drop by 5-20%.
The demand for affordable housing is anticipated to decline as a result of increasing interest rates, higher inflation, and rising building costs. The property and rental markets are likely to be the hardest hurt by inflation, which is predicted to be on the increase throughout the economy.
Because its currency is tied to the dollar, the Central Bank of the United Arab Emirates has raised its base rate cumulatively by 225 basis points since March alongside the U.S. Federal Reserve.
Many real estate analysts agree that it is not entirely possible to restore the market to its pre-pandemic state, especially given the recession-prone and inflation-invested state of the economy.
However, the companies offering their service may thrive in the upcoming financial year as the year closes to an end.