Dubai property prices are set to fall by a further 10% to 20% by early 2016 as the market correction continues, the global ratings agency Standard & Poor’s (S&P) said on Monday.
The emirate is already ranked as having one of the world’s worst-performing property markets – and, according to the S&P forecast, the decline in prices is set to continue.
But a massive crash like that seen in 2009 during the financial crisis is not on the cards, the agency said.
“Additional supply and lesser demand on the UAE property market this year is likely to result in a moderate 10% to 20% correction in Dubai residential real estate prices – much less than what led to the Dubai crisis in 2009,” it said in a statement.
READ MORE: Dubai property market near bottom of world ranking as prices fall 6.1%
The forecast declines follow “three years of sharp price appreciation” that saw prices peak in 2014, it added.
“The market is facing a turnaround in operating conditions that is likely to dampen performance. Global oil prices have sharply declined since June 2014 and Standard & Poor’s Ratings Services believes they are likely to remain relatively weak throughout this year and next. Given the role of this commodity in the region, domestic economic growth in the UAE is likely to slow markedly in 2015 and 2016. We also observe some volatility on the emirates’ equity markets.”
Standard & Poor’s credit analyst Franck Delage said in the report that the market should be able to handle the forecast drop in prices.
“We believe real estate companies in the UAE are better armed to deal with the current slowdown and should be able to absorb it with limited ratings impact,” said Delage.
READ MORE: Dubai property market near bottom of world ranking as prices fall 6.1%
The report noted that retail and commercial real estate should prove “more resilient than hospitality given the sizable supply of hotel rooms expected in anticipation of Expo 2020”.
The British estate agency Knight Frank said this month that Dubai property prices were down by 6.1% in the first quarter of 2015 compared with the same period last year, ranking it among the world’s worst-performing markets.
The emirate was placed 53rd out of 56 countries ranked in the Global House Price Index, having seen a similar year-on-year decline in residential property prices as Greece.