Signs of life as property picks up

▶ Trickle-down effect with non-oil recovery gaining momentum

Damac Properties, the Dubai real estate company that owns a Trump-branded golf course, revealed yesterday that its profit fell 21 per cent in the second quarter. Meanwhile, Emaar Properties, the developer behind Burj Khalifa, posted a 14 per cent jump in second quarter net profit, beating forecasts made by the analysts.

While the results may not be great for the company, there are increasing signs of improvement for the Dubai property market, which has slowed down over the past couple of years because of the strong US dollar and slower economic growth on the back of a slump in oil prices since the summer of 2014.

July statistics show there has been a recovery in the month compared to June as sales of off-plan units jumped, according to a survey by Egyptian investment bank EFG-Hermes. The findings of the report released yesterday show, for instance, that off-plan sales in Emaar’s luxury Downtown Dubai development near The Dubai Mall surged in value to Dh416.7 million in July compared to Dh91.3m in June.

That is invariably good news for Dubai and the UAE in general. It illustrates that the recovery in the non-oil economy is in full swing.

That trend has been evident for the past few months in the purchasing managers’ index, which has pointed to an uptick in the sales of goods and services as business confidence returns and consumer spending

Economists are expecting a further improvement in the non-oil economy for the remaining months of the year

increases. Economists are expecting a further improvement in the non-oil economy for the remaining months of the year as spending on government projects ahead of Expo2020 that Dubai will host pick up pace.

There are, however, risks as always to the outlook for the real estate market and they are mainly related to the spectre of rising interest rates.

The UAE’s monetary policy is linked to the US Federal Reserve policy as the dirham is pegged to the US dollar.

Higher interest rates, which appear to be likely going forward, may have an effect on property prices as the cost of mortgages will increase, making potential buyers more reluctant to take the plunge on purchases.

It will also make it more difficult for existing owners to pay off their monthly mortgage bills.

For now, however, the market appears to be getting back on track.