Dubai’s office and residential rentals continue to face a “downward slope” following the United Kingdom’s exit from the European Union, according to real estate firm JLL.
The company noted there was a “slight probability” of British investors being negatively impacted by the devaluation of the British pound following the historic vote last month.
“However, we believe the effect of the decision will have temporary repercussions as a substantial number of British investors who work and reside in the UAE avoid sourcing their income in sterling,” said JLL MENA head of research Craig Plumb.
“If we dissect the market further, particularly for residential, we notice that expatriates in Dubai are most likely to continue renting their homes instead of switching to ownership, resulting in sales being more negatively affected than the rental sector.”
In tourism and hospitality, the firm said that a 4 per cent fall in the value of the euro so far this year and a sharp decline in the value of the British pound had made Dubai a more expensive destination for many European tourists
This was challenging conditions for luxury brands and increasing demand for mid-market properties, JLL said, decreasing average room rates.
The firm forecast that if external factors stabilise for the rest of 2016, Dubai’s residential market would easily recover at the beginning of next year.
More broadly in its Q2 report, JLL said total residential stock in Dubai increased to 462,000 units following the addition of 1,500 villas for Emirates staff in District 11 of the Mohammed Bin Rashid City project and a further 1,680 villas and apartments across the city.
Only one office tower, Westbury Square in Business Bay, was handed over during the quarter adding 30,000 square metres of gross leasable area and taking total stock to 8.5 million square metres.
JLL also said its forecasts for office supply in 2017 and 2018 had been revised downwards due to project delays and less office allocation in mixed-use developments.
In retail, 30,000 square metres of gross leasable area was added during the quarter through Community Centre in International City, Ibn Battuta Mall Phase II, and The Ribbon in Motor City.
A further 150,000 square metres are expected to be added this year and JLL said its 2017 pipeline had increased to 159,000 square metres after construction resumed on the Dubai Art Centre in Barsha and Sustainable City Mall.
However, the firm noted that the upcoming implementation of VAT was setting a “worrisome tone” across the market”, which may impact the luxury sector.