DUBAI: Real estate prices in Dubai rebounded sharply from a record low in late 2020, but demand is uneven and the oversupply of residential properties will put pressure on prices in the long run, making the recovery fragile, said S&P Global Ratings.
Real estate investment firm CBRE Group said last week that average residential property prices in Dubai rose 4.4% in the 12 months ending in August, the highest annual growth since February 2015 , but a continued decline in apartment rents signaled continued weakness in the long-struggling industry. .
“The rebound in residential real estate demand has largely benefited high-end developers with increased presales and price improvements,” S&P said.
He said market data showed apartments, which make up 85-90% of properties, saw a price increase of around 6% in the second quarter. Villa rates have also accelerated while apartment rents are still lagging behind.
Reuters reported in March that the luxury segment of Dubai’s real estate market had received a boost from last year’s sharp decline, but the overall real estate recovery is still a long way off.
Even before the coronavirus pandemic, the long-term economic trend in the UAE had been sluggish since the 2014-15 oil crash. Supply has exceeded demand for new homes and apartments for years in a market where most of the population is foreigners, many of whom left during the pandemic.
House prices are at a low point in the cycle, S&P said, expecting a rebound in 2021-2022 supported by demand driven by improving consumer confidence, rising oil prices and gas, high vaccination rates in Dubai and accommodation by the World Expo City, delayed for a year due to the pandemic.
“In the longer term, we believe that the demand for residential properties will depend (…) on the success of recent government initiatives aimed at increasing the population, such as new visas and more liberal social laws,” S&P said. .