1 July 2017

Dubai: A Cabinet of Real Estate Curiosities

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Since the beginning of the 2015 fears of an ‘over supply’ have captured the zeitgeist of investors. Recent data published from the Dubai Statistics Center reveals that in 2016 population growth exceeded the housing stock growth by more than 2:1. Whilst this comparison is spurious as it does not account for occupancy levels on the supply side, the outpacing of supply growth relative to population growth was highlighted as one of the concerns to look out for.

However, in 2016, despite headline announcements of “layoffs” across various sectors in the Dubai economy the population has continued to rise, doubling its historical average of 5%. The job creation in other sectors such as entertainment and tourism have over-compensated for the loss of jobs in sectors such as Banking and Finance.

Transactional activity has been leading indicator to prices in various investment markets including real estate. Over the last 5 months in 2017 we have seen steady uptick in transactional activity compared to the same period last year.

A bi-variate analysis of transactional activity and prices reveals that the strength of the correlation increases substantially with a lag. Over a 12 month lag the correlation between both variable is +0.45, suggesting that if transactional activity continues to ratchet higher we can expect city wide price escalation in the coming months.

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