11 September 2017

Dubai: Interconnectedness

An analysis of GDP growth rates of a basket of cities against the World GDP reveals that Dubai and Hong Kong’s GDP growth rates have a high correlation with the World. Both cities are financial hubs and the centers of trade and commerce, making them heavily influenced by world markets. This correlation then trickles down into money flows and therefore financial assets.

In the equity markets, we can witness that UK and Hong Kong have the highest correlations, whereas Pakistan and USA have the lowest. Dubai’s correlation appears to be in the middle, indicating that foreign equity movements are moderately influential to the domestic capital markets, as opposed to India, Hong Kong and the UK.

In the real estate markets, Dubai has similar correlation strengths to the world index to that of New York and London. This signifies that Dubai’s status as a global property hot spot has rapidly increased.

In order to ascertain clues to the future of Dubai’s real estate markets, its critical for investors to look at the health of international markets; not merely from a perspective of money flows but also in terms of valuations. We opine that Dubai is moving along this trajectory of market maturation, a process that is already being reflected in its price points.

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