Demand for institutional quality assets across Dubai and other key GCC centres has been rising, according to a study, 2015 Dubai Real Estate Investment Report, prepared and released by global property consultancy Knight Frank.
The growth is assisted by numerous factors, including the fact that yields remain relatively high in context of other global cities, reported Construction Week Online. Against a backdrop of low interest rates globally and relatively volatile financial markets regionally, the flow of capital into real estate has continued.
Over the past 18 months, the spread between all-property yields and the Dubai government bond has widened beyond its long-run average – almost entirely due to the receding “risk-free” rate.
“While the Federal Reserve has indicated that it is likely to push up interest rates – which in turn should help to close the gap – our suspicion is that prime all-property yields will also edge down,” said the report.
It added: “This is predicated on the fact that historically there has been a reasonable correlation between changes in prime all-property yields and GDP growth in Dubai – which forecasters have projected, will accelerate in 2015. In other words, faster economic growth should lead to further hardening of yields in the near-term.”