The roller-coaster conditions in the Dubai property market continue. After the terrible fallout following the FC 2007/2008, the sector is facing a new challenge.
In a recent note, the S&P rating agency published a view that the end of the drop in property prices is not yet in sight, and this is because of an ongoing and massive supply glut. In a related note, another agency estimated that, to stabilize property prices, no new buildings should be done for at least two years!
At present, property prices have gone back to the levels of 2014, and the worries are not stopping there. Construction business accounts for about 14% of the local GDP, and now most financial institutions engaged with the market have taken a negative view on the sector. This is further impacting the negative sentiment across the nation.
Also, geopolitical tension in the region is another subject of concern; this means fewer people, even apart from the pandemic, are travelling through and to Dubai.
The country’s stock market index is down YTD by 20%, while the real estate and construction index is down by 29%. There is no quick turn-around to be expected—it will take some time for the market to recover. The real estate market is a long-term play, and its recovery will be painfully slow. The only visible light at the end of the tunnel is the fact that the USD is expected to weaken for a prolonged period of time, and this will make the local market for non-USD denominated investors attractive.