Dubai property market expected to bounce back with supply forecast ‘exaggerated’

Dubai’s property market is likely to bounce back from a slowdown in the first half of this year, thanks to the increasing size of the market and the emirate’s significance as a business and leisure hub.

The real estate website Bayut said in its 2015 first half UAE market report that “though the slowdown continues, it will only be some time before things turn around and head upwards”.

Property sale values in Dubai dropped between 5 and 10 per cent in the first half of 2015, compared to the corresponding period in 2014, said the report. Yet the city’s population is likely to rise – with more than 200,000 job permits issued in first three months of this year and a similar number anticipated in the second quarter, with the figures yet to be released.

“We reckon things will move the other way come 2016 and rise therefrom, and our optimism banks on bright prospects of a continuous rise in the emirate’s population, its status as a top tourist resort, its world-class leisure and hospitality facilities, and its importance as the core regional business hub,” said Bayut.

Dubai’s property dip has been led by a stronger US dollar, Russian sanctions, a fall in the price of oil, euro-zone issues and the IMF’s less-than-promising outlook for the global economy.

However, the number of new housing units entering Dubai market are “exaggerated” and “the fear of oversupply is misplaced”, Bayut said.

“The news of 25,000 new units entering the market has also become a question mark,” it said, as it believes that about 15,000 new units will enter the market this year.

Abu Dhabi, on the other hand, experienced a “calm and consistent rise” in rents during the first half of the year. After the 11 per cent growth in residential rent in 2014, growth in the first half of 2015 continued on the back of the limited supply of units in prominent locations and the removal of the market cap.

“A reduction in government spending was expected this year following the decline in oil prices, which could have slowed down the pace of demand growth,” Bayut said.

“But this has not happened during the first half of the current year. In contrast, the short-term supply of units in the market was generally constrained, leading to relatively stable market conditions.”