S&P Global Ratings expects a continued decline in Dubai’s residential real estate prices and rentals to 2020.
Dubai residential property prices and rents declined by 5%-10% in 2017, with the global ratings company expecting this trend to continue in the next two to three years.
In its latest credit FAQ titled Dubai's Real Estate Slump Is Set To Persist, With Only Expo 2020 Offering Any Hope, S&P Global Ratings points to whether Expo will have a significant effect on the sector, but says the market “remains hopeful”.
“We expect a continued decline in residential real estate prices as well as decreasing rentals for the retail and residential segments,” according to the report.
“The downward trend will mostly reflect promised new supply coming onto the market in the next two to three years. Hotels, too, will remain under pressure to accept much lower average daily room rates to maintain occupancy levels.
“This sector runs a serious risk of overbuild, the effects of which would be felt post-Expo,” the report said.
S&P does note that the sector could still benefit from the potential increase in economic activity and positive business sentiment attached to the event, as an expected 25 million visitors and new residents could support the market.
“We anticipate a speculative surge in prices, devoid of any demand and supply mismatch,” the report added.