Sam Khater, Freddie Mac’s chief economist, says, “The drop in mortgage rates continues to stimulate the real estate market and the economy. Home purchase

What are your forecast’s for the UAE real estate sector for 2016-2017?

Here is a breakdown for you of key macroeconomic metrics that will help you shape an idea of the status of the UAE property market.

Supply and Demand:

  • Supply has been constantly growing over the past two years more so in Dubai than in Abu Dhabi, with a frenzy to complete more projects in Dubai prior to the expo 2020
  • On the other hand, demand has drastically decreased[2] in 2015 (with apartments being affected more harshly than villas) and then in 2016 the decrease in demand has softened with almost half the drop witnessed in 2015.

    This has a lot to do with the continuous strengthening in the dollar, the drop in oil prices that has weakened surrounding economies in the GCC, especially the KSA market, the slowing economic growth in India, and cash outflow restrictions from India.

    Demand into the Dubai Real Estate market significantly depends on the status of the Indian, British, Pakistani markets, and their purchasing power as determined by currency exchange rates.

Job Growth:

Job Growth has been in the negative for the past years, only expected to rebound as of this year to a modest growth of +2% according to the latest employment index[3]. A more significant population and job growth is needed to fuel a solid recovery.

Mortgage Rates:

Recent Interest rate hikes are expected to further continue going into the end of 2018, increasing loan rates and further impeding a recovery in prices. Of course, how much and how fast rates rise will be the determining factor here.

Government Spending:

The total budget allocation for the year is up by 2.6 per cent compared to 2016. Infrastructure spending is up by 27 per cent compared with 2016[4]. While a significant increase in infrastructure spending will help boost the real estate market, a more serious monetary stimulus might be needed to drive a stronger recovery. While Value Added Tax has just been introduced, it could have a positive effect on bridging the budget deficit, as long as residential real estate is not affected.

Looking Ahead:

It is expected that we are entering a recovery phase come the year 2018 with attempts to inflate job growth, increase spending and tourism.

One point to note however, what I described above is just a view of the market in general, you will need to examine each submarket on its own. Where for instance, a lot of the jobs that will be created in Dubai for the expo 2020 will more likely drive a much greater demand in affordable housing than in luxury properties. While at the same time there has been a recent shift in supply for more affordable properties.

You will need to carefully assess each asset class before making any projections going into the future.

If you want to secure the right property financing and locate the right deal then reach out to our top notch team at EquityFinders. With 15+ years of experience in the UAE real estate market, no one understands the market better than EquityFinders(