Currency rates fluctuations impact Dubai real estate market

01.09.2015
Phidar Advisory linked some  national currencies fluctuations to the fall in Dubai house prices.

Phidar Advisory new report linked India, Pakistan and the UK currencies rate to the Dubai real estate prices decline.

According to the report, housing prices in Dubai continued to decline in the third quarter, compared to the previous quarter. Prices in apartment rentals segment declined by 0.4% in the last three months, while prices in sales segment witnessed a 2.7% decline. Investment yields in the apartment sector increased during this period and averaged to 7.4%. And villa rentals fell by 1.3% during the same period, according to Phidar Advisory, while prices in villa sales sector decreased by 2.6%. Villa investment yields increased to 4.8% in the third quarter.

The reason for change in Dubai real estate prices, according to Phidar Advisory analysts, is in the market’s decreased activity, which in turn is partly due to the currency fluctuations in three foreign countries.

“Analysis reveals a significant relationship between three key foreign currencies and Dubai real estate prices,” said Jesse Downs, managing director of Phidar Advisory.

“Unsurprisingly, the key currencies are the Indian Rupee, Great British Pound and Pakistani Rupee. Changes in Dubai property prices appear linked to fluctuation of these currencies. So, currency trends may help us to understand and forecast local property prices.”

The midpoint exchange rates, which Phidar Advisory uses to set Real Estate International Demand Index (REIDI), fell down against the US dollar for all currencies in H1 2015, except the Chinese yuan and Hong Kong dollar. And REIDI decreased significantly according to the rates decrease. However, the number of apartment sales transactions in Dubai increased by 3% in the third quarter, compared to the same period of 2014, while the volume of villa sales transactions decreased by 3.2%.

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