Dubai’s middle market property under pressure?

In a break from the general consensus from industry experts, rating agency Finch predicts that it will be mid-market properties in Dubai, rather than luxury, that will be subject to rental and price declines.

Prevailing thought in recent Dubai residential property forecasts has concentrated on the impact likely to be felt by high end property, but Finch thinks that these are the properties that will ‘show resilience’.

Fragmented performance most likely

Since Q3 2016, developers have been launching more and more mid-market apartments and houses. They have also been shifting locations out from Dubai’s city centre and traditionally popular locations, further out to the suburbs.

Prices were generally directed below Dh800 per square foot, something that is currently being echoed in Abu Dhabi at the moment. Studio apartments are currently being offered to first time buyers are Dh450,000.

On the positive side, Fitch state that they believe the chances of a shock in the real estate sector in Dubai remains remote. This is down to most large developers already having reduced their debt when compared to earlier years, allowing them to stand firm during market cycles.

Real estate to accelerate next year

Both commercial and residential real estate supply in Dubai is likely to accelerate from 2018 onwards, in the run up to Expo 2020. Whether the market is fit to absorb this supply is a different story, and will be a big challenge for the industry.

Over 56,000 residential units are due to be delivered over the next two years, but it’s possible that a lot of the projects will be delayed, or even cancelled, therefore reducing this glut.

It’s also expected that retail property will face the same sorts of pressures that residential and commercial space is under due to depreciating currency. This makes shopping more expensive in Dubai, and neighbouring countries are also experiencing low oil prices which is affecting their purchasing power.

Samir Salya

Samir Salya is the Chairman of Reign Holdings and is involved in real estate and construction within the UAE and UK. Samir holds over 20 years of experience in executive management, business expansion, performance improvement, sales and marketing.