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Tue 24 Jan 2017 01:50 PM

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'Too early' to call Dubai property market recovery in 2017

New report says there are too many factors contributing to uncertainty around Dubai real estate market this year

'Too early' to call Dubai property market recovery in 2017

Predictions of Dubai's real estate market reaching the bottom of its cycle with a rebound imminent may be premature, according to a new report.

Jesse Downs, managing director of real estate consultancy Phidar Advisory, said it is "too early" to call a property price recovery in Dubai.

She added that there are too many factors contributing to uncertainty in 2017 including a strengthening US dollar, anticipated increase in the cost of debt as well as sluggish regional economic growth.

Phidar Advisory said in December 2016, apartment lease rates in Dubai declined 0.6 percent, while sale prices increased 0.5 percent, pushing gross yields down to 7.7 percent, a loss of 8 basis points since November.

Its report also said that rents for villas decreased 0.8 percent, but sale prices increased 0.4 percent in December, which pushed yields down to 4.6 percent, a quarterly loss of 5 basis points in November, using a three-month moving average. 

“Pundits are overlooking the key risks of 2017,” said Downs. “The strong and strengthening US Dollar, anticipated increase in the cost of debt as well as sluggish regional economic growth do not support a short-term recovery in the region’s hub,” she added.

“Residential yield erosion is not sustainable in a year that will experience new risks,” said Downs. “Weak investment demand and minimal stimulus will put the onus on market fundamentals. Supply is gradually growing, but net job creation still appears weak – a jobless recovery is not a sustainable recovery.”

In 2016, Phidar’s Dubai Real Estate Investment Demand Index REIDI decreased by 8.2 percent compared to 2015, driven primarily by exchange rate fluctuations.

It added that the top three buyers of individual completed units in Dubai were Indians, Britons, and Pakistanis.

“Market sentiment can always pull the market in an irrational direction,” Downs said. “But considering only fundamentals, it is too early to call a market bottom and recovery, there are simply too many factors contributing to uncertainty in 2017.”

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