Dubai Real Estate Market: Housing Transactions Hit Dh62 Billion Despite Inflation Threat
While the economy and property market continue to be impacted by global inflation, the UAE’s economy and the market will not be affected nearly as badly as other countries due to the country’s strategic moves. Due to effective government measures, leading property consultants in Dubai, Houzon, expect global inflation to have a limited impact on the Dubai residential market and the economy in UAE.
Inflationary trends are becoming more prevalent in the UAE and the cost of living is expected to rise substantially over the coming months. Although UAE real estate market has witnessed a surge before the inflation, it seems it has been further boosted by inflation.
Despite the record spike in worldwide inflation, the Dubai residential market has recorded almost AED 62 Billion worth of Residential sales during the first five months of this year.
The UAE has many reasons to be optimistic when it comes to Dubai’s ability to contain inflation. Experts cite the government’s very diversified import strategy, the recent initiatives to boost food security, and the strong US dollar, which is reducing imported prices, as major positives. The most successful measures include the government’s pre-emptive attempt to freeze prices for more than 11,000 basic commodities, such as bread, meat, milk, and poultry. In addition, the price surge for crude oil is likely to boost economic growth sharply.
According to data from Oxford Economics, experts expect Abu Dhabi’s GDP to grow just over 6 percent this year, a rebound from about 0.5 percent the previous year. The resurgent global travel industry and Dubai’s appeal as a global holiday destination are likely to boost Dubai’s GDP by a similar amount, mirroring last year’s growth.
Despite the steady progress made in the economy, business activity levels have continued to slow in the UAE’s non-oil sector. While orders climbed to a 12-month high in April, recruitment appears to have slowed. PMI readings for April indicate that businesses are clearly nervous about rising cost pressures. The best way to ease the pressure is to reduce the pace of new hiring and pass on cost increases to consumers. This approach is typically viewed as a last resort, but we have not seen it yet.
According to UAE, its fiscal policy is consistent with the US. The recent increase in the rate of interest by 0.5 percent does indicate higher outgoings for the mortgaged household properties in the UAE. But the UAE is still competitive against other prime markets across the globe.
At present, just 18 percent of Dubai’s residential market, based on value, is financed by mortgages. Last year, the figure reached nearly 40 percent and in 2007, the figure was just over 50 percent. While there has been a reduction in residential mortgage lending, financing has been extended across all real estate asset classes at the end of May in excess of Dh38 billion.
Based on the number of mortgage-backed transactions this year so far, 2022 is on pace to be the best-performing year over the past five years in the whole real estate market. Keeping up with the current growth of the market has been the main challenge for most banks.
The majority of deals at the very top end of the market, however, are cash sales, a trend that is largely the result of the inflow of ultra-high capital net worth looking to purchase the most expensive properties in Dubai. Cash still rules the housing market for now.
As a result of the house price growth projected for the mainstream market and the prime market in Dubai of 5-7 percent this year, Dubai remains one of the best places to get inflation-proof housing properties.
In the near future, the demand for housing properties in UAE is very likely to rise given the influx of residents, the ease of obtaining visas, and growth-oriented government programs. Whenever the business figures are analyzed in the coming quarters or so, they will show growth, but one must take into account the inflation to determine the actual growth. One must consider the other factors at play.