UAE Real Estate Market : A clear impact of low oil prices has been observed in the market as the property prices in Dubai, Sharjah, and Abu Dhabi have dropped over 12 months.
Low global oil prices coupled with tight rules and regulations from RERA in Dubai have taken their toll on the UAE real estate market as the prices in major property markets of UAE have dropped significantly over last 12 months.
While Dubai’s economy is least depending on oil trades, still a little impact of drop in oil prices around the globe are showing their impact on its real estate market. Over the period of last 12 months, property prices in Dubai have dropped by 12.2 percent which is the highest drop around the world.
Starting from June, 2014 oil prices have dropped 50 percent around the world and per barrel price is only $50 at the moment. In terms of UAE’s economy and UAE real estate market, oil sector plays a significant role especially in the case of Abu Dhabi which is the capital of United Arab Emirates. Dubai on the other hand, doesn’t rely that much on oil exports as its major source of revenue is tourism, hospitality and real estate industry.
A positive news for UAE real estate market is the lifting of sanctions from Iran as it could increase the oil prices and drive more Iranian buyers to invest in Dubai real estate projects. Before the sanctions, UAE real estate market was very well saturated with Iranian investors and their return could mean a boost in prices for Dubai real estate industry as well.
In 2010, Iranian investors accounted for 12 percent in UAE real estate market and according to data released from Dubai Land Department, Q1 2015 saw a 3% drop from Iranian investments.
Among other states in UAE, Dubai (a major player in UAE real estate market) has seen a significant fall in its property prices. Just in Q2 of 2015, prices fell from 2 to 3 percent and overall drop from June, 2014 to June, 2015 is recorded at 12.2 percent.
Villa prices in Dubai saw the most decline ranging from 3 to 3.5 percent in Q2, 2015.
Abu Dhabi on the other hand in UAE real estate market has come out as a strong contender where property prices didn’t take a huge plunge. Q2, 2015 witnessed a drop of 0.2 percent in property prices in emirates of Abu Dhabi which was the first ever downward movement since Q3 2012.
Current average per square foot price in Abu Dhbai stands at Dh 1,336. Demand in Abu Dhabi is quite strong as compared to Dubai due to more stable prices since last couple of years.
As Dubai observed a decline in its property prices and also the rentals, it had a direct impact on Sharjah rental market. Sharjah holds an important place in UAE real estate market as a lot of expatriates working in Dubai, reside in Sharjah due to lower rents. Apart from that, accommodation quality has improved in Ajman which has resulted in many tenants moving there.
Sharjah recorded an average drop of 2.3 percent in rents, whereas the property prices fell by 4.2 percent during Q2 2015. Villa rents, however saw an increase of 1.4 percent.
Reference: Gulf Business