Posted on December 22, 2022 by Driven Properties Latam
Property prices in Dubai will rise this year and next at a slower pace than previously thought as higher mortgage rates and the cost-of-living crisis reduce foreign demand, a survey by the investment agency suggested. Reuters news among real estate market analysts published on September 2022.
With an economic rebound fueled by higher energy prices, Dubai's property market rebounded strongly from the severe 2020 recession and buyers snapped up luxury homes after the emirate eased pandemic restrictions faster than other cities in the world. But most housing market analysts in the Reuters poll said the recovery was fragile and uneven, and that a glut of residential property coupled with rising interest rates would pressure prices in coming months.
Home price gains are forecast to slow to 6.5% in 2022 and 3.0% in 2023, down slightly from 7.5% and 4.5% in a May survey, respectively , according to the average of the forecasts of ten real estate analysts surveyed. That outlook is in stark contrast to other global property markets, such as Canada, Australia and New Zealand, where house prices were expected to fall this year and next.
"Residential property demand hit an all-time high this year, but this trend could change due to rising cost of living, rising mortgage rates and new early bidding," said Haider Tuaima, director and head of real estate research. roots in ValuStrat.
"Smaller apartment units in areas where a lot of new inventory is anticipated have already seen prices stabilize and will most likely face negative growth in the short to medium term."
An oversupply of homes from years past has come to the rescue of this housing market by keeping affordability in check. Many other major housing markets are struggling with runaway house price inflation.
When asked to describe the level of house prices in Dubai on a scale of 1 to 10, from extremely cheap to extremely expensive, the average response was 6.
"As Dubai continues to be a buyer's market, developers will refrain from raising prices substantially. So affordability may continue for a few years," said Anuj Puri, President of ANAROCK Property Consultants.
"Indeed, as there was oversupply in many of the areas, the market failed to drive higher prices of late. The prevailing lower prices have also made the Dubai market attractive to both investors foreigners as well as locals".
But Asteco Property Management, Deloitte, Property Monitor, Morgan's International Realty and ValuStrat noted that median home prices would have to fall 5% to 20% to make housing affordable.
Rising interest rates, higher inflation, and rising construction costs are likely to reduce demand for affordable housing. Inflation is rising throughout the economy and is expected to hit the housing and rental markets the hardest.
The Central Bank of the United Arab Emirates has increased its base rate by 225 basis points accumulated since March in parallel with the US Federal Reserve, because its currency is pegged to the dollar.