Mansion Global

Dubai Feels the Heat of Global Turmoil

Home prices fell 12.2% year-over-year in the second quarter

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This penthouse in Dubai is listed for $8.1 million. The private terrace has a Jacuzzi, a gazebo and a dance floor.

GULF SOTHEBY'S INTERNATIONAL REALTY
This penthouse in Dubai is listed for $8.1 million. The private terrace has a Jacuzzi, a gazebo and a dance floor.
GULF SOTHEBY'S INTERNATIONAL REALTY

Lower oil prices and economic turmoil around the world are pushing down house prices in Dubai. Residential prices in the United Arab Emirates city fell 12.2% year-over-year in the second quarter, putting Dubai at the bottom of Knight Frank’s Global House Price Index released this week. It was last on the list of more than 50 markets, behind countries such as Brazil, which is facing political and economic upheaval, and conflict-ridden Ukraine. The index compares mainstream residential markets around the world. Knight Frank, the London-based real estate consultancy, points to several factors hurting Dubai's housing market, including falling oil prices. The U.A.E. ranks sixth among the top world oil producers. Dubai’s real estate market has also been affected by the strengthening of the U.S. dollar, to which the U.A.E.'s dirham is pegged. The Russian ruble has lost almost half of its value against the dollar in the past year. Russians are among the top 10 foreign buyers of real estate in Dubai. Additionally, measures taken by the government to cool off the real estate market at the end of 2013 have raised the cost of buying property in Dubai and dampened residential sales activity, Knight Frank said. The cooling effects include an increase in real estate registration fees from 2% to 4%, which is split equally by the seller and the buyer. The step, taken in September 2013, was meant to eliminate speculation in the market, the Dubai Land Department said at the time. The emirate recorded a total of 23,000 real estate transactions in the first half of 2015, with a total value of 129 billion U.A.E. dirhams (around $35 billion), according to the Land Department. The numbers are an improvement from a year ago. Between January and June 2014, the city reported a total of 17,289 real estate transactions worth 37.5 billion U.A.E. dirhams. Despite the recent decline in home prices, Knight Frank says Dubai offers homebuyers “strong economic prospects, a low tax regime and stable political system.” Dubai had one of the best-performing economies in 2014, ranking fifth among the world’s 300 largest metropolitan areas surveyed by the Brookings Institution’s Global Metromonitor for 2013-2014. The World Bank noted that no other metropolitan area grew faster relative to its national economy than Dubai, which recorded a 4.5% growth in per capita GDP versus 1.6% for the U.A.E. Outside the Arab world, India is the biggest source of foreign investors in Dubai’s property market, according to the Land Department. Others are coming from Pakistan, Great Britain, Canada, Russia, China, the U.S., France and Afghanistan. View the Dubai listing on Mansion Global. Write to Andrea López Cruzado at andrea.lopez@dowjones.com Follow Mansion Global on Facebook, Twitter and Instagram Write to us at info@mansionglobal.com