The outlook for the housing market in Dubai is dimming due to higher mortgage rates

The outlook for the housing market in Dubai is dimming due to higher mortgage rates
The outlook for the housing market in Dubai is dimming due to higher mortgage rates

Analysts expect a slowdown in price growth this year and next, according to a Reuters poll

Dubai house prices will rise this year and next at a slower pace than previously expected as higher mortgage rates and a cost-of-living crisis dampen foreign demand, a Reuters poll of property analysts showed.

Amid an economic recovery fueled by higher energy prices, Dubai’s property market has bounced back strongly from a sharp downturn in 2020, with buyers looking for luxury properties after the emirate eased pandemic restrictions faster than most other cities around the world.

But most property analysts polled by Reuters said the recovery was fragile and uneven, and an oversupply of housing together with rising interest rates would pressure prices in the coming months.

House price growth is expected to slow to 6.5% in 2022 and 3.0% in 2023, compared with forecasts in the May survey for growth of 7.5% and 4% respectively. .5%, according to the median forecast among 10 property analysts surveyed between Aug. 15 and Sept. 2.

That outlook contrasts sharply with other global property markets, including Canada, Australia and New Zealand, where home prices are expected to fall this year and next.

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

“Smaller housing units in areas where new supply is expected are already seeing price stabilization and will most likely face negative growth in the short to medium term.”

An oversupply of housing in previous years saved the heated housing market, keeping affordability under control. Many other property markets are struggling with skyrocketing house price inflation.

When asked how they would describe the level of house prices in Dubai on a scale of 1 to 10 (cheapest to most expensive), the average response was a six.

“Given the fact that Dubai continues to be a buyer’s market, developers will be reluctant to increase prices significantly. Hence, affordability may continue for several years,” says Anuj Puri, Chairman, ANAROCK Property Consultants.

“In fact, given the fact that there is oversupply in many areas, the market has not been able to reach higher prices recently. Predominantly lower prices have made the Dubai market attractive to both local and foreign investors.”

However, according to Asteco Property Management, Deloitte, Property Monitor, Morgan’s International Realty and ValuStrat, median home prices would need to fall between 5 and 20% to make housing affordable.

The UAE’s central bank has raised its key interest rate by a total of 225 basis points since March, in line with the pace of the US Federal Reserve, as the currency is pegged to the dollar.

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