© Reuters. FILE PHOTO: A general view of the residential property at Balqis Residence on Palm Jumeirah in Dubai, United Arab Emirates, March 25, 2022. REUTERS/Christopher Pike

Posted by Munther Hussain

BENGALURU (Reuters) – Dubai house prices are set to rise steadily for most of the next two years driven by demand from foreign investors, according to a Reuters poll of analysts who warned of high interest rates and a shortage of affordable housing. It can be a palliative activity.

With the economic recovery fueled by rising energy prices and the revival of trade and tourism, the real estate market in Dubai has ignored a long series of declines over the past year and has maintained positive momentum ever since.

The latest Reuters survey of 13 real estate market analysts, on May 11 and 26, showed an average increase in property prices in Dubai of 7.5% in 2022, unchanged from the previous survey two months ago.

Faisal Durrani, Head of Middle East Research at Knight Frank, said the market sentiment, buoyed by the easing of the pandemic, “along with the successful hosting of the World Expo, and the reopening of travel corridors … continues to support the market’s recovery.”

Data from the Dubai Land Department showed that the emirate’s real estate sector had its best quarter in more than a decade, with the highest sales for the first quarter since 2010.

However, the price increase was expected to slow to 4.5% and 3.0% in 2023 and 2024 respectively, stabilizing the market.

This is in contrast to many other real estate markets which have seen dizzying heights.

“What we saw last year was more of a recovery from the pandemic; growth this year appears to be slowing,” said Haider Taima, director and head of real estate research at ValuStrat.

When asked what will move the housing market in Dubai this year and next, the majority of respondents, 11 out of 13, responded to the demand of foreign investors. Chose two for local order.

These expected price increases, while modest, will present challenges to first-time buyers as interest rates have been expected to rise and affordability will be affected.

The market in Dubai, where prices are still well below their recent peak in mid-2014, faces several downside risks this year and next, including higher interest rates, a shortage of affordable housing, and inflationary pressures.

All but one of the 12 analysts, who answered an additional question, said the affordability of first-time buyers will deteriorate in the coming years.

A two-thirds majority also said rents in Dubai, where many expats live, would become less expensive over the next two years.

Those looking to buy will be pushed out of the market and forced to continue renting. Rents are rising and will continue to rise, demand will increase, and without affordable housing, this will contribute to an increase in the total cost of living. said Lynette Sakito, Director of Data and Digital Transformation at Allsopp and Allsopp.

(For other stories from Reuters’ quarterly housing market surveys:)

(Reporting and polling by MD Manzer Hussain; Editing by Harry Kishan, Ross Finley and Louise Heavens)