12 June 2016

Dubai – Musings

The recent statement that has permeated the Dubai zeitgeist is the diversification of the economy into different sectors and away from real estate. A granular break-down of the data attests to this, as the percentage of people who were working in the field of real estate (real estate services and construction) have halved (50% to 25% from 2008 to 2015). A similar dynamic has transpired in the GDP figures. Real estate services and construction in 2008 contributed 31% of the emirates GDP, whereas in 2015 it accounts for 22%. This shift into other sectors has allowed the economy to be more resilient to exogenous and endogenous shocks.

A closer look into price and transactional activity signals that a bottoming out may be underway. Price declines over the last 18 months have begun to taper, allowing for price stability. Alongside this transactional activity has begun to inch higher in the first 5 month of the year. Although, transactional activity is below 2015 levels, if the momentum continues to market could be entering a bull market.

A segmentation analysis of the Dubai freehold supply in monitored areas reveals that government sector developers account for 56% of units in the market. However, over the last decade the contribution of private sector developers has been increasing. As Dubai continues to launch new units, we witness that the ratio is skewed towards private sector developers (70:30). This shift attests to the growing role of the private sector in the build-out of the Dubai skyline.

To download the full report click here: http://blog.reidin.com/PublicReports/UAE160613.pdf