Dubai: Residential Property Prices May Fall or Stay Steady In 2015

2015 is a new year and a new beginning for Dubai. A study by real estate firm JLL points out the hits and misses of 2014 that should probably help the economy of Dubai.

A new study conducted by internationally renowned real estate firm JLL (Jones Lang LaSalle) suggests that during 2015, the average prices of Dubai's residential buy property In Dubai Marina may remain steady or may come down by about 10%. The second half of 2014 saw considerable stabilization in Dubai’s residential market average rent rates and sale prices. JLL also suggests that over the last two years, the prices and rental rates of property in Buy Apartment in Dubai Marina had grown to a very unmanageable rate.

Lowered Oil Prices Impacting the Real Estate Market

• Concerns have been voiced by many experts over the impact of lowering oil prices on the Emirates’ property market profit ratio.
• However, JLL mentions that Dubai’s real estate market is not very vulnerable to lesser revenue from oil, compared to other oil exporters, who are part of the Gulf Cooperation Council (GCC). This is primarily because Dubai has a very diverse economy, and it continues to grow in non-oil sectors as well.
• The study also points out that while lowered oil prices will dampen investment in real estate for a short period, Dubai will successfully make up for lost ground by expanding its global reach in oil sales.

Increase in Job Creation Will Lead To Demand for Affordable Housing

• JLL predicts that the residential sector is likely to remain ‘as-is’ for this year, since the market will soon absorb 25,000 additional projects that are being launched in 2015.
• However, their main concern is whether these projects will be delivered within their speculated deadlines, since delays will incur losses at a slow yet devastating rate.
• They have elucidated positive hope that Dubai’s economy will continue to expand at a considerable rate with newer job creation, which will in turn increase the demand for affordable housing.
• They further stated that the Dubai administration needs to ensure the availability of affordable and cheap housing for people in the middle-income segment.

The study shows that in 2014, the supply of basic units in Dubai increased considerably to 377,000 from 342,000 in 2011. The firm predicts that more than 25,000 residential units will be added in 2015, about 13,000 in 2016, and possibly 12,000 by 2017.

Boost in Business Activity

• The report predicts that the year 2015 is expected to see a huge boost in business activity.
• Inflation touched about 4% in November 2014 giving a hefty rise to increased housing & utility costs for budgeted people. Hence, the Government’s budget should address issues which would seek to enhance revenues and decrease inflation to reduce the undue pressures on the cost of living.
• The 2015 budget for real estate is also under scrutiny for a proposed 15% reduction in spending on infrastructure as compared to 2014.

Possible Solutions

What we should hope for 2015 is that all segments of the market somehow bounce back from subdued growth of 2014, and that the average prices & rental rates in the Arabian Ranches villa sector stabilize further. Growth in the retail and hospitality market needs to surge in order to indemnify losses incurred due to oil price fluctuations, which led to a steep decline in tourism to the Emirates.

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