Dubai: After a 20 per cent drop in values over the last 18-24 months, Dubai’s property prices are well outside of any bubble space – in fact, they are now ‘fairly valued’, according to the Swiss bank.
Dubai’s property market is placed 25th in UBS’ Global Real Estate Bubble Index, which places eurozone cities as being most at risk of being in bubble territory. “Home prices in Dubai are 40 per cent below 2014 levels in inflation-adjusted terms – a fall similar in magnitude to the crash after the global financial crisis in 2008,” UBS report finds. “Globally, the pandemic amplifies some long-term uncertainties surrounding urban housing.”
Ali Janoudi, Head of Middle East and Africa at UBS Global Wealth Management, said: “Dubai's property market has reached a cyclical low. What we’re seeing is price effects of high population growth and easier mortgage regulations are being offset by ongoing high supply growth and weaker oil prices."
The bank analyzed residential property prices in 25 major cities. Of these, apart from Dubai, Madrid, San Francisco and Hong Kong were the ones that saw price declines during the period. Hong Kong’s dip could have much to do with the often violent protests that swept through the city in recent months, and which would have dissuaded overseas investors.
Priciest and the no-movers
The Munich and Frankfurt markets are most at risk of overheating; Paris and Amsterdam are also ‘treading on bubble risk territory’. Same with Zurich, Toronto and Hong Kong, while Vancouver's housing market is also overvalued. London, San Francisco and Los Angeles too are in the same situation price-wise.
To that mix, one must factor in all the uncertainties on businesses and personal incomes set off by the pandemic. Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, said: “However, it’s clear that the acceleration over the past four quarters is not sustainable in the short run. Rents have been falling already in most cities, indicating that a correction phase will likely emerge when subsidies fade out and pressure on incomes increase.”