17 September 2014

Is there such thing as the “Cityscape Effect”? – Report by REIDIN & Unitas

Whilst there is an impact on transactional volumes, there is no discernible effect on prices, putting to rest the brokers talk of “Buy during Cityscape”

Cityscape in Dubai, being one of the world’s largest trade shows for the real estate industry attended by over 250 local, regional and international real estate exhibitors, continues to shed light on future projects, as well as highlighting the accomplishments of the past.

However,  it’s impact needs to be measured more in terms of visibility and transparency of upcoming supply rather than as an event for discovering value.

The prevailing market wisdomduring that particular period of time has been that there is a strong “Cityscape Effect” on prices, especially with a recent slowdown in the market.
Some buyers believe that buying before Cityscape is a good tactic in order to capture the upward price trend, whichhas led to reinforce the mistaken maxim that prices will rise during this seminal event.

However, a statistical analysis reveals that on a three month rolling return basis between Cityscape 2004 and Cityscape 2013, had led to show that there is no relationship between Cityscape and asset prices, as seen over the past eight years. Whatever effect has been felt qualitatively in the form of information dissemination rather than price discovery. It also shows that price action is affected by more macro themes and events such as the Arab Spring or the increase of transfer fees.

When transactional activity is analyzed; revealing a five-fold jump in terms of the delta percentage change. While we do see some seasonal factors, there can be no doubt that the landmark exhibition plays a pivotal event in terms of increasing investor interest and appetite for Dubai real estate assets, by giving clarity on future pricing methods and mechanism of developers.

By shedding light to investors and end-users on the market direction, it’s clear that interest spikes as a result of this event.

As is the role of all exhibitions, Cityscape serves as a seminal event in agglomerating and disseminating market information in a city with rapidly moving dynamics. The event is held In Sep-Oct, historically when transactional volumes increase anyways.

Developers continue to wait till this event to launch new projects, creating a windfall of supply within the off-plan market and Cityscape will remain an integral part of the Dubai real-estate market.

*Unitas is the author for these research reports and REIDIN is the sole data provider for these research reports.
 

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