Dubai real estate slump to continue for another two years – S&P

The downturn impacting the Dubai property market is expected to continue for at least another two years, according to ratings agency S&P.

In a report, the company said prices and rents had declined the 5-10 per cent it expected last year and were likely to continue their downward shift for the foreseeable future.

Recently released market data from Chestertons MENA indicated that Dubai saw a surge in off-plan sales in 2017 but a a two-year slump in the market for finished property continued.

Read: Dubai property correction to continue amid off-plan surge

However, S&P suggested Dubai’s hosting of the 2020 World Expo could offer some hope for market players.

“We believe this correction will continue at least for this year and next, before prices stabilise in 2020 at the earliest,” S&P said.

“How much stimulus Expo 2020 Dubai provides remains to be seen, but market players remain hopeful.”

The decline in real estate prices and rents is expected to continune for the residential and retail segments, according to the report, with new supply entering the market over the next two to three years a key factor.

S&P forecast hotels would also remain under pressure and have to accept lower average daily room rates to maintain occupancy levels.

“This sector [hotels] runs a serious risk of overbuild, the effects of which would be felt post-expo,” it warned.

Dubai Tourism forecast in a study released on Tuesday that the emirate’s hotel room supply would grow 11.1 per cent a year during the 2017-2019 period to reach 132,000.

In 2020 itself, S&P said the potential increase in economic activity and business sentiment linked to Expo 2020 should support the market amid expectations of 25 million visitors to the event and a flood of new residents.

This could lead to a “speculative surge in prices, devoid of any demand and supply mismatch”, it suggested.

Chestertons MENA said apartment and villa rents declined 3 per cent from the third to the fourth quarter of 2017 and sales prices were down 2 and 6 per cent respectively.