Dubai: 4 things we know so far about its slumping market

What to expect from the City of Gold in the final months of 2016

As the crown jewel of the Organization of the Petroleum Exporting Countries, Dubai has been left at the mercy of the ongoing volatility in crude oil prices. Jobs in the petroleum industry have not been as prolific, and as a result, residential property values in the emirate have not reached Burj Khalifa-like heights lately.

Mansion Global had the opportunity to ask Dana Salbak, associate partner and head of MENA research at Knight Frank, about the downturn saga in the City of Gold and what it means for the luxury segment.

Luxury properties will remain resilient

Because Dubai has an undersupply of prime residential properties, prices in this range will remain stable, according to Salbak. In fact, prime homes will outperform the overall residential market average in the short to medium term. “It is a niche market and investors are willing to pay a premium to be owners of prime property,” she explained. “Many use these as their primary homes, but others as secondary homes, particularly other Gulf Cooperation Council nationals from Saudi Arabia and Kuwait.”

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Dubai’s residential market may turn around next year

For the second half of the year, buyers should expect continued softening in the emirate’s housing market. “While it’s difficult to predict when the next growth cycle will be, we expect the residential market to level out by the end of 2016 before seeing gradual recovery in 2017,” Salbak said.

Volatility in oil prices has affected investor sentiment

Salbak reported that the value of transactions in the first half of 2016 plunged by 12.4 percent from the same period last year due to the petroleum market slump. She also anticipates the upcoming presidential elections in the US and geopolitical uncertainties around the region to impact demand for Dubai housing this year.

Blame Brexit?

According to the Dubai Land Department, Britons invested USD1 billion in Dubai property in the first half of 2016, compared with USD1.3 billion in the same period last year. “While these numbers imply that the value of investments might slow down following the Brexit vote (as they have), it’s still quite substantial, and we don’t foresee this dropping drastically,” Salbak said.

Read next: Dubai real estate market bottoms out

Source: Property Report