Media reports suggesting that Dubai’s property market is on the brink of a turnaround could have an adverse effect on the sector, a local real estate advisory firm has warned.
The managing director of Phidar Advisory made the comments in the company’s first quarter report into the market, where it said residential prices had dropped during the period and forecast further declines.
“There has been a flurry of positive headlines over the past month with limited evidentiary support or analysis,” said Jesse Downs, in a press statement. “Research indicates unsubstantiated optimism can have a destructive impact on a market.
“The available real time indicators do not support the story of a short term turnaround. And ignoring the bad news now can create a crisis later.”
Phidar Advisory said its Dubai Real Estate International Demand Index (REIDI), which measures propensity for investment in property, dropped by 2.2 percent in the first quarter compared to the same period a year earlier.
Its research also showed that apartment rents dropped by 2.1 percent, while sales fell by 1.9 percent. Villa rents slumped by 4.7 percent while sales rose by 1.6 percent. The firm said the latter figure followed a quarter-on-quarter drop of 7.9 percent in the last quarter of 2015.
Phidar also said that the declines had been initially been driven by the strong US dollar, although the impact of the falling oil price was now starting to have an effect.
“The low oil price will start to slow economic and job growth, reducing the growth in housing demand,” the research said. “Rents have and will likely continue to adjust downward, which will put additional downward pressure on sale prices, in order to keep yields stable.
“Anecdotal evidence indicates companies are slowing job growth and those companies with job openings take longer to hire and may be reducing packages to manage costs.”
In March, real estate consultants ValuStrat said property prices in Dubai may have bottomed out, with values rising slightly in February.
The firm said there were "minute indications" in February of an early recovery in some areas of the emirate.
The February ValuStrat Price Index (VPI) for Dubai's residential market signalled possible signs of a bottoming-out in monthly values across the 26 areas it monitors for apartments and villas.
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