Market likely to hit the bottom in a few months and pick up before Expo 2020.
There is potential for residential real estate prices in Dubai to decline by another 5 to 10 per cent this year before the market hits the bottom, said Steve Morgan, CEO of Savills Middle East.
This is on top of the 6 to 10 per cent decline Dubai residential property prices witnessed in 2018, the executive added.
"Real estate prices have slipped and with the strengthening of the US dollar, investors from traditional source markets such as Russia, India, UK and Europe are facing affordability issues. It's not just real estate, but other sectors like tourism are also facing affordability issues. Real estate across the world, even in advanced markets, goes through cycles," Morgan told Khaleej Times on Monday.
Supply of additional inventory is also weighing on the Dubai housing market. 2019 will see the handover of projects that were announced when Dubai won the Expo 2020 bid. This also coincides with the softening in oil prices. But, demand is expected to pick up once the Expo kicks off in 2020.
However, Morgan insisted that the products being delivered were of high quality, citing units in La Mer, City Walk, Dubai Creek Harbour, etc.
"Dubai is ahead of the curve compared to other GCC real estate markets. There is pressure across most of the GCC markets we operate in," the Savills executive informed.
He requested the government to do more to bring down the cost of transactions. "There are steps in the right direction such as the long-term visas, property visa for retirees and spurt of payment plans for off-plan properties. The real estate sector will also benefit if Dubai manages to attract more visitors who transit through its airports. The increase in infrastructure spend is likely to trickle down to the economy," he reckoned.
Meanwhile, Morgan affirmed that Dubai is still an investor-friendly market. "There are good yields to be had if you buy at the right price in the right project. But, second generation residents who have been living here for many years are keen to own their own property."
Referring to the marginal impact of VAT on the commercial property market, Morgan said: "The cost of operating a business is still high in the UAE. The cost to apply for or renew a trade licence, visa, etc., is rising every year. VAT is an additional cost for these businesses."
He also cited the flight to quality in the office space and big occupiers spreading out across the city. He referred to HSBC moving its headquarters to Downtown Dubai as an example of consolidation.
Savills announced the rebrand of its Middle East business following the acquisition of Cluttons Middle East on May 31, 2018. The firm, which was previously represented by associates in the Middle East, has completed a six-month integration process with Cluttons Middle East, which will now be known as Savills.
In the Middle East, it will operate across five countries, including Bahrain, Egypt, Oman, Saudi Arabia and the UAE.
Savills is looking to further strengthen its capital markets business by working with clients in the Middle East to enable them to access investment destinations across the world. "There are several sovereign wealth funds and private family businesses in the UAE looking to invest across asset classes and geographies," Morgan added.