By Sarah Townsend
Q2 rental values see downward trend following UK vote to leave European Union, according to new report
The UK’s vote to leave the European Union (EU) is unlikely to have a damaging long-term impact on Dubai’s real estate market, though it will bring temporary uncertainty as British investors are hit by the fall in the pound, according to JLL.
The consultancy’s Q2 2016 Real Estate Market Overview found that the Brexit decision has had an adverse effect on the retail and hotel sector, with average daily room rates dropping by 13 percent year-on-year.
Craig Plumb, head of research at JLL MENA, said: “Due to the devaluation of the pound, Dubai and the Middle East and North Africa (MENA) region as a whole has become an increasingly expensive destination for European visitors.”
In the residential sector, sales prices rose by one percent quarter-on-quarter while rental prices dropped by one percent, reflecting the preference of Dubai residents for rentals over sales and possible uncertainty brought about the Brexit vote, JLL said.
It noted that British nationals are the third largest investors in real estate, according to figures from Dubai Land Department.
Dubai is also the most “open” real estate market within the region and therefore more susceptible than others to external factors.
“As Brexit brings slight uncertainty into the market, it was noted that in Q2 2016 rent values continue to face a downward slope in the office and residential sectors,” the report said.
Plumb added: “Even though it is too early to predict the long-term implications, overall there is a slight probability of British investors being negatively impacted by the devaluation of the British Pound following Britain’s decision to exit the EU.
“However, we believe the effect of the decision will have temporary repercussions as a substantial number of British investors who work and reside in the UAE avoid sourcing their income in sterling.
“If we dissect the market further, particularly for residential, we notice that expatriates in Dubai are most likely to continue renting their homes instead of switching to ownership, resulting in sales being more negatively affected than the rental sector.”
However, JLL concluded that, if external factors stabilise over the rest of the year, the Dubai residential market could “easily recover” by 2017.
The report also showed that office vacancy rates in Dubai dropped from 23 percent to 16 percent year-on-year – a downward trend attributed to lack of quality office space.
However, it added that Dubai remains the largest and most active office market in MENA as many businesses still select Dubai as their regional hub.For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.