Residential properties in Dubai, the most vibrant business hub in the Middle East, continued to cool in the third quarter of the year as falling oil prices and strong U.S. dollar dampened foreign investment.
During those three months, transaction volume of off-plan and existing homes dropped to about 900 units, the lowest since 2011, according to a report released Friday by Phidar Advisory, a Dubai-based real estate research firm.
The softening of Dubai’s housing market is mainly attributable to the falling oil price and strong U.S. dollar, according to the report. An unfavorable exchange rate discouraged buyers from India, Great Britain, and Pakistan, the top three foreign investors in Dubai. The purchasing power of currencies not pegged to the U.S. dollar are diminishing as U.S. dollar appreciates.
In the meantime, low oil prices lessened demand from the Gulf’s key buyer, Saudi Arabia, as potential buyers have less wealth to invest in Dubai.
India and Saudi Arabia were the two largest investors in Dubai’s properties in the first half of this year, according to the governmental agency Dubai Land Development. Indians invested AED 7.3 billion (US$2 billion) in Dubai real estate, outpacing the next biggest country, Saudi Arabia, by around AED 2 billion (US$544 million).
More: Who’s Buying in Dubai?
Compared with September, November’s sales volumes showed some improvements, but, the number is still lower when compared to the same period in the previous two years. Plus, the November increase is likely “a reflection of seasonal variance,” Jesse S. Downs, managing director at Phidar Advisory, said in the report.
Single-family homes fared better than apartments in November. Sale prices of apartments declined 0.5% while prices of single-family homes (also known as villas) increased 5.6%. But again, “The single-family home sale price increase is neither indicative of a long-term trend nor a market recovery,” said Ms. Downs.
One factor likely to drag down home prices is that rental demand has weakened, as sale prices tend to eventually follow the rental market. In November, lease rates for apartment and single-family homes declined 2.3% and 4.6% respectively, according to the report.
Write to Fang Block at email@example.com
More from Mansion Global:
Follow Mansion Global:Facebook | Twitter | Instagram | LinkedIn | Messenger
Write to us: firstname.lastname@example.org