Debt and Risk Lowered by Dubai Developers
Many master developers of Dubai have lowered their debts relatively compared to pre crisis levels, offering flexibility to consistent weather market. According to ratings of Fitch, authorities in the city took action for reducing the risk involving increased registration tax for restricting speculation thus making developers deposit a part of construction costs as security and also reducing maximum loan to value ratio on residential property transactions.
Transparency and regulations of market have improved in past few years which are more advanced than other GCC members but are still behind developed markets. The prices for residential properties decreased by 8.8% since last year and 0.9% this year in the first quarter, while the average residential property prices of rents lowered down by 9.9% in 2016 and 4.7% in the first quarter this year.
Factors like depreciation of other major currencies as against the dollars are reflected by this, reducing the purchasing power in neighboring nations. The repetition in the oil and gas finance streams has also reduced the demands for office space.
Although it has not resulted in blanket price reduction with restrained affects on prices and yields on prime assets at prime locations. The fragmented performance is expected to continue this year. Office rentals will continue to be pressurized however they are still beneath the pre crisis peak and some new space will be available in coming term. The commercial as well as residential real estate supply is likely to go at a fast pace after 2017 for the preparation of Expo 2020 and market capability to take in the new supply will be main challenge. N next 24 months, more than 56,000 residential units are due for completion but the projects can be delayed or can be cancelled thereby reducing the pipeline.
Picture Courtesy: www.3villaz.com
Dubai real estate and rentals prices are likely to be pressurized for rest of this year, though the performance is likely to be fragmented having the main assets displaying resilience as lower tier properties outside the center will be having price and rental declines.
The risk of a shock property is less because of strong market regulations, lower financing transactions and strong non oil sector growth resulting in flexible residential and office segments. The analysis of DLD figures display fast paced activity in second half of last year after a slow start to the year. Last year the value of deals fell about 2% and number of transactions dropped 8% compared to last to last year.
Source: Own A Space