Tuesday, 20 February 2018

Expo 2020 Could Help Lift Dubai's Still-Slow Real Estate Market

DUBAI (S&P Global Ratings) Feb. 20, 2018

In 2017, Dubai residential property prices and rents declined by 5%-10%, as we expected. We believe this correction will continue at least for this year and next, before prices stabilize in 2020 at the earliest. How much stimulus Expo 2020 Dubai provides remains to be seen, but market players remain hopeful.

In our credit FAQ titled "Dubai's Real Estate Slump Is Set To Persist, With Only Expo 2020 Offering Any Hope," published today on RatingsDirect, we address some of the questions investors have asked us about Dubai's real estate market and the direction in which it's heading.

We expect a continued decline in residential real estate prices as well as decreasing rentals for the retail and residential segments. 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.

We anticipate residential prices and rents will keep falling until 2020, the Expo year. In 2020, however, the sector could well start to benefit from the potential increase in economic activity and positive business sentiment attached to Expo; the expected 25 million or more visitors and floods of new residents to Dubai should support the market. We anticipate a speculative surge in prices, devoid of any demand and supply mismatch.