Borrowing costs

POLL-Dubai housing market outlook darkens due to rising borrowing costs

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BENGALURU, Sept 5 (Reuters) – Property prices in Dubai will rise this year and next at a slower pace than previously thought as rising mortgage rates and the cost of living crisis reduce foreign demand, according to a Reuters poll of housing market analysts.

With an economic rebound propelled by rising energy prices, Dubai’s property market has recovered strongly from the severe 2020 recession, with buyers snapping up luxury units after the emirate eased restrictions pandemic restrictions faster than most cities in the world.

But most property market analysts in a Reuters poll said the recovery was fragile and uneven, and that an oversupply of residential properties as well as rising interest rates would put pressure on prices over the next few months. coming months.

Home price growth is expected to slow to 6.5% in 2022 and 3.0% in 2023, down slightly from 7.5% and 4.5% in a May poll, respectively, according to median forecasts. of 10 real estate analysts surveyed from August 15 to September 15. 2.

This outlook contrasts sharply with other global real estate markets, including Canada, Australia and New Zealand, where house prices are expected to fall this year and next.

“Demand for residential properties has reached an all-time high this year, but this trend could change due to the rising cost of living, rising mortgage rates and expected new supply,” said Haider Tuaima, director and head of real estate research at ValuStrat.

“Smaller apartments in areas where a lot of new inventory is expected have already seen prices stabilize and are most likely facing negative growth in the short to medium term.”

An oversupply of homes from previous years has come to the rescue of this once-hot housing market by controlling affordability. Many other major real estate markets are struggling with rampant house price inflation.

When asked to describe the level of real estate prices in Dubai on a scale of 1 to 10, from extremely cheap to extremely expensive, the median response was 6.

“As Dubai continues to be a buyer’s market, developers will refrain from significantly increasing prices. Therefore, affordability may continue for a few years,” said Anuj Puri, Chairman of ANAROCK Property Consultants.

“In fact, since there was oversupply in many areas, the market has failed to push prices up lately. The drop in prices has made the Dubai market attractive to foreign investors. and local too.”

But Asteco Property Management, Deloitte, Property Monitor, Morgan’s International Realty and ValuStrat said average house prices would need to fall between 5 and 20% to make housing affordable.

Rising interest rates, rising inflation and rising construction costs are likely to reduce demand for affordable housing. Inflation is on the rise across the economy and is expected to hit housing and rental markets the hardest.

The Central Bank of the United Arab Emirates has raised its key rate by a cumulative 225 basis points since March in parallel with the United States Federal Reserve, as its currency is pegged to the dollar.

(For more stories from Reuters Quarterly Housing Market Surveys:)

(Reporting and polling by Anant Chandak; Editing by Hari Kishan, Ross Finley and Andrew Heavens)