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Dubai: what determines the trend of the property market

Thursday, 03 December 2015

Last year the property market in Dubai has faced a sharp decline in the volume of transactions, particularly in the primary market Downtown Дубайwhere the volume of transactions in the first half fell 69% to the volume of the corresponding period last year. The prices in the secondary market in the first half of 2015 fell by an average of 8% and the data for the 3rd quarter 2015 confirms the downtrend.

This is determined by the following factors:

-     The strengthening of the US dollar against a basket of currencies, as a result the currencies of main buyers of property in Dubai lost up 50% of its value which leads to a rise in the cost of property for the residents of these states. The rising of interest rates in the United States in December 2015 and during 2016 caused the outflow of funds from emerging markets and increase US dollar (and also dirham). In our opinion this is a major factor.

-     Decreasing of “Arabian springs” by 2014 the previously caused significant migration MENA region to Dubai before which until 2014 led to an increase in demand for residences and offices.

-     The growth of 2011-2013 is also associated with a deficit of properties due to the slowdown in construction during the crisis of 2008-2010.

-     The fall in oil prices and the resulting drop in revenues of some major groups of buyers from GCC.

-     A slowdown in China.

-     Tighter regulation of the activities of developers and other market players in Dubai.

The action of the main factors putting pressure on property prices in Dubai continues and as long as there are no changes in the actions of central banks the trends changes of the US dollar against the currencies and resource prices will not change, property prices in Dubai will have a downtrend and it will happen no earlier than the end of 2016.