Dubai's real estate slump to last until 2020, says S&P

DUBAI, Feb 20 (Reuters): Dubai real estate prices could decline by 10 to 15 per cent over the next two years, hit by new supply, geopolitical risks and the introduction of value added-tax in the United Arab Emirates, S&P Global Ratings' analysts said on Tuesday.

The grim prediction came after Dubai residential prices fell by 5 to 10 per cent in 2017, and the weak property market has also begun to hurt earnings of the emirate's top property developers.

"We believe this correction will continue at least for this year and next, before prices stabilise in 2020 at the earliest," said Sapna Jagtiani, S&P's credit analyst for corporate and real estate ratings.

Rents in both residential and retail markets will also remain under pressure, and hotels will be forced to accept lower average daily room rates to maintain occupancy levels, S&P said.

Property prices are down 16-19 per cent from their peaks of over three years ago, National Bank of Kuwait said in a report this month.

Jagtiani told reporters that Dubai's Expo 2020 could benefit the property market due to the potential increase in economic activity on the back of the expected arrival of 25 million visitors and new residents.

However, she cautioned the property sector ran the risk of "overbuild," the effects of which would be felt beyond 2020. Property consultancy Jones Lang LaSalle's 2017 report suggested the planned residential supply in Dubai would grow by 9 per cent in 2018 and 7 per cent in 2019.