Realty hopes weak dollar breathes new life into market

Realty hopes weak dollar breathes new life into market

Gulf News, 7 January, 2019

Dubai: The dollar’s recent softening could be a good thing for Dubai’s property market, if this manages to bring back more buyers from non-dollar-denominated markets.

Because the fact remains that even with property prices sliding in Dubai in the last two years, the dollar’s overwhelming strength during this period made buying real estate here still pricey for these investors. This meant investors in India, Russia, China and even those from the UK found the currency difference against the dollar to be too steep for a decent return from any property purchase here.

“As the dollar strengthened for the typical nationalities who’ve been investing in Dubai real estate, it meant the normal economics of overseas buyers coming in during times of oversupply and prices slipping hasn’t happened so far,” said Steve Morgan, CEO of Savills M.E., which as of January 1 completed all the integration processes from its purchase of Cluttons’ regional interests last June.

“Dubai real estate was still expensive for people not holding dollars — the pound was at a ten-year low against the dollar. Now, if the dollar manages to extend its current weakness, it could make real estate here more affordable and overseas buyers will come back in greater numbers.”

Upcoming Dubai Land Departments data will show how much of buying interest was among foreign investors. But the data only goes by the nationality of the buyer, and does not record whether he is an expatriate based here or an individual based outside the country when the deal was made.

According to market feedback, foreign buying interest at the premium end of the property market is still steady — it’s in the sub-Dh3 million space that deals involving these investors have fallen significantly.

Plus, competition for the investor dollar in global real estate remained intense throughout 2018. These days, one can buy apartments in Manhattan for under $1 million (Dh3.67 million) — the first time this has happened since 2015 and brought on by oversupply. It’s a theme that Dubai’s property market is not unfamiliar with.

According to Morgan, “There’s no reason why an oversupply situation is anything to get embarrassed about. No one has [a] crystal ball in predicting outcomes. There is an inelasticity about supply in real estate — developers start on new projects when the market is good. It takes three to five years to build a project and during this period markets cool down or heat up.

“Right now in Dubai, even foreign buyers will find attractive the lower deposit requirements and longer payment plans developers are offering. They get in with a small amount of money and buyers are attracted by the future of those developments. This had a knock-on effect on [overseas investor] demand for finished properties.”

Interestingly, the reverse is true among domestic buyers, where demand shifted decisively in favour of ready properties during 2018.

Post-Cluttons integration

After the Cluttons integration, Savills will be on the lookout for any opportunity to tap into foreign fund flows headed here. But there is much that can be done even outside of these transactions.

Residential leasing and asset management will remain a priority — currently, this makes up 30 per cent of its Dubai’s revenues and 70 per cent in Sharjah.

“Leasing still holds a lot of value and is key to winning property and asset management contracts,” said Morgan.

The deal was effected without any job losses, according to Morgan. In a marketplace as tight as the one in Dubai right now, and especially in the real estate space, that did take some doing.

“We didn’t let anybody go and, in fact, grew it further by absorbing most of the Cluttons’ franchise teams in Oman and Bahrain,” he added. “The projection for the next 12 months is to increase the workforce by 24 per cert. All the former Cluttons’ associations in the region have come to an end after serving some notice period.”

Global real estate had a solid workout in 2018

Sure New York and Miami property markets failed to deliver because of oversupply, but the rest of the US was doing quite well for itself in attracting investors. And on the other side of the Atlantic, London had “more transactions than ever before,” according to Steve Morgan, CEO of Savills M.E.

Brexit’s sway on UK’s real estate has not placed a vice-like grip on buying.

“Residential prices in London have declined 10-15 per cent in the last 18 months… add to that the 12-18 per cent currency benefits for those holding dollars, and you see reasons behind the deal flows.”

Globally, Savills reckons that real estate deals were up 8.5 per cent over the year before.