By Andy Sambidge
Knight Frank says buyer sentiment has 'weakened notably' after gov't measures to cool property market
The price of prime property in Dubai is forecast to fall by up to 10 percent during 2015 but growing interest from Indian buyers will cushion the declines, according to a new report by Knight Frank.
Knight Frank’s Prime Global Cities Forecast said that luxury residential markets face a diverse range of challenges and opportunities in 2015.
Of the eight cities included in its forecast, Dubai sits at the bottom but even here prime prices are only expected to slip by 5-10 percent.
It said limited supply and a growing appetite from Indian purchasers should cushion the market.
It added the top risks to growth in 2015 include cooling measures introduced by the government, a slowing global economy and high inflation combined by low household income growth.
Knight Frank's report said: "At the end of 2013, the Dubai Land Department doubled the transfer fee to 4 percent and the UAE Central Bank introduced mortgage caps. As a result, a proportion of buyers face the prospect of much higher property purchase costs than they did 18 months ago.
"Largely because of this, buyer sentiment has weakened notably. In annual terms, residential transaction volumes saw a double digit decline in the six months to September. Also, in the third quarter of 2014 prime residential prices experienced their first quarterly fall (albeit of just 0.2 percent) in almost three years."
It added: "In the near-term, there is little to indicate that residential transaction volumes in the luxury segment will stage a strong recovery.
"However, a combination of healthy projected economic growth and the limited supply of new prime residential property, suggests that any further price falls in this segment next year will be moderate."
In October, the International Monetary Fund said increases in Dubai's property prices have moderated quite a lot and it was now less concerned about them than it was in May.
The IMF has previously warned that rapid rises in Dubai real estate prices, which earlier this year were in some cases a third higher than they were 12 months previously, could lead to another bubble and then a crash in the emirate.
The Knight Frank forecast put New York back on top with luxury prices across Manhattan expected to accelerate by 5-10 percent over the course of 2015.
Strengthening foreign interest (from Chinese, British, Russian and Latin American buyers) as well as improving economic indicators are behind our positive outlook.
It said Sydney is also on the radar of foreign buyers but here limited luxury supply is pushing prices higher, forecast to rise by up to 5 percent in 2015.
This report regarding Dubai and its findings are already out of date i'm afraid.
I don't see any mention of the halving of oil prices since the summer. This will affect business in Dubai across the board as the trading hub of the region and don't forget a third of the UAE's GDP comes from oil. Look what is happening to the Dubai stock market. Real estate prices will follow.
As they did in late 2008/2009 Dubai house prices will ultimately mirror the decline in its stock market, therefore the price fall will indeed be double digit but up to 20 to 25 per cent.
As oil prices dwindle, foreign banks also get jumpy in terms of lending, bearing in mind Dubai still owes oil producer Abu Dhabi 2o billion USD. Thus a number of stalled real estate projects by implication.
Under normal circumstances, low oil prices should bring down airfares and therefore increase tourism, however, the battle against IS just down the road has seen heightened security warnings to travellers and indeed anti western expat incidents in the UAE have increased as a spin-off. Including one recent US fatality and indeed IS has threatened action against all members of the anti-IS coalition.