Additional supply and lesser demand in the UAE property market in 2015 could lead to a moderate 10%-20% correction in Dubai’s residential real estate prices, a study recently found.
According to a research paper by Standard & Poor’s, titled Inside Credit: The UAE’s Property Market Is Prepared for the Current Correction, a correction in the UAE’s residential real estate market after three years of sharp price appreciation is expected, but it “should be nothing on the order that led to the Dubai crisis in 2009”.
After reaching a peak in 2014, the property market in the UAE is set to soften in 2015 and early 2016. The market is facing a turnaround in operating conditions that is likely to dampen performance.
Global oil prices have sharply declined since June 2014, and S&P’s ratings services arm believes the prices are likely to remain “relatively weak” throughout this year and the next.
“We believe real estate companies in the UAE are better armed to deal with the current slowdown and should be able to absorb it with limited ratings impact,” S&P’s credit analyst Franck Delage, said in the report.
The diversifying economy, positive demographics, and protective measures from local regulators should help prevent a crisis like that of 2009, the report adds. Stronger capital structures, and good revenue mixes should allow issuers to withstand headwinds over the next 12-24 months.
Retail and office commercial real estate should prove more resilient than hospitality given the sizable supply of hotel rooms expected in anticipation of Expo 2020, the report added.Â
