Dubai:
The dollar’s upward trajectory continues to play spoilsport with overseas buyers’ interest in Dubai realty. And it is getting magnified with the gyrations that the likes of the Indian rupee has had in recent weeks. And with overseas investors at a disadvantage over their dollar exchange rates, Dubai’s realty market could continue with the downbeat transactional activity of recent months,
Based on inward investor demand, “the key currencies are the Indian rupee, British pound and Pakistani rupee — changes in Dubai property prices appear linked to fluctuation of these currencies,” said Jesse Downs, Managing Director Phidar Advisory.
According to the Q3-2015 report issued by Phidar on Monday, ‘Analysing monthly data since January 2014 indicates a statistical significant causal relationship between the Indian rupee and Dubai real estate prices. Historically, Indian, British and Pakistani investors have topped the lists of foreign buyers of Dubai real estate.
“So, unless perceived shifts in fundamentals of these currencies or perceived shifts in the fundamentals of Dubai real estate [especially supply, demand and risk], it appears difficult to justify a near term rebound of Dubai property prices.”
If volatile currency values are the cause of much concern for the local property market, that of a commodity — oil — too could prove a burden.
“If oil remains low through 2016, the market could start to feel an impact through slowed economic and job growth, possibly starting in 2017. The fundamentals do not support a short term rebound.
“Thus, sellers holding out for a rebound may have to hunker down and wait, possibly up to three to four years or more.”
Through the first six months of the year, apartment transactions are down 3 per cent compared to the 2014 numbers. For villas, the decline was by 3.2 per cent year-on-year.
With the market skewing in favour of buyers, the question now turns to what will sellers do?
According to Phidar, there are funds ‘waiting in the wings’ to get deployed in local real estate. But potential buyers want to be assured they are likely to get in at the right sort of prices and resultant yields.
“Buyers are holding out for higher yields than sellers are willing to accept, so transactions are at a stalemate. Aside from a few distressed sales and exchange rate motivated sales, market activity is minimal,” Phidar notes.
