Housing slump sets in

Standard & Poor’s this week estimated that values may fall by as much as a fifth this year, while brokers CBRE Group and JLL Inc. see a 10% decline. Summers has never been the best time for real estate in Dubai. However, this year data from the Dubai Land Department reveals that there was a 50% decline in sales activity over the first five months compared to the same period in 2015 as more buyers adopt a ‘wait and see’ attitude. Standard & Poor’s this week estimated that values may fall by as much as a fifth this year, while brokers CBRE Group and JLL Inc. see a 10% decline. Still, builders and banks face less risk than they did six years ago, thanks to lending restrictions, a clampdown on speculation and greater dependence on rental income. “The sort of swings in house prices we expect in the short-term are lower than what we’ve seen in Dubai’s recent history,” said Franck Delage, director of corporate ratings for Europe, the Middle East and Africa. “We are not saying the market has matured yet, but we expect the current correction to be less excessive than in 2008-09," he added. Meanwhile, the cosmopolitan nature of Dubai coupled with a strong lifestyle consideration continues to make the emirate an extremely attractive real estate market for the global super rich, according to Wealth-X and Sotheby’s International Realty. In a new report, the companies reveal that the emirate has the potential to become fast-growing ultra high net worth (UHNW) hub in the Europe, Middle East and Africa (EMEA) region in the coming years. Experts predict that instead of the focus being on the residential market, developers will begin to change course again towards the commercial segment in order to cater to pent-up demand. At the same time, the emirate continues to attract luxury investors looking for a safe haven in the region. The key question will be the extent to which activity levels increase again in the final quarter as this will provide a good indicator of the direction of prices in 2016.