World Economy

Currency Fluctuation Hits Dubai’s Real Property Market

Currency Fluctuation Hits  Dubai’s Real Property MarketCurrency Fluctuation Hits  Dubai’s Real Property Market

An analysis of major cities that rely on foreign inflows for real estate purchases have shown mixed trends on the fluctuation of the dollar, said a report by property experts.

There is a moderately strong inverse correlation between money flows in the Dubai real estate market and the US dollar, according to a report compiled by Reidin, a leading real estate information company focusing on emerging markets and Unitas Consultancy, TradeArabia reported.

The three major foreign buyers in the Dubai real estate market are Indians, British and Pakistanis. Indian and Pakistani investment flows have a direct correlation with the devaluations of their currencies.

As the currency devalues, capital flows increase to Dubai, as investors look to hedge their investments.

However, in the UK the opposite trend transpires. As the sterling devalued, more investors retreated back to purchasing property in London in order to capitalize on the weak sterling, stated the report.

“With an appreciating dollar since 2011, transactions (and investment flows) have been impacted adversely as property values have become more expensive in local currency terms, even though we witness that in 2016, transactions have stabilized and even increased slightly in the latter half of 2016,” it added.

An analysis of property prices over the last 10 years in three major cities driven by foreign investment, New York, Singapore, and Dubai reveals a dichotomy when measured against changes in the US dollar, said the Reidin report.

New York real estate prices have had a low positive correlation of 0.1 to the strengthening dollar, whereas Singapore and Dubai have a moderate inverse correlation of (-0.33) and (-0.28).

An analysis of British buyers of Dubai assets against the USD/GBP reveals an opposite trend to that of India and Pakistan. As the GBP gets weaker, capital flows in Dubai begin to decrease as investors take advantage of the weak sterling in order to purchase assets in London and other parts of Britain.

On India, the property expert said it has a high positive correlation between investment flows and the movements in the USD/INR. The recent demonetization of the Indian rupee has added to the fall in foreign investments of purchasing Dubai real estate assets in H2 2016.

A stable rupee has actually led to a moderation of inflows, and the correlation implies that as the rupee depreciates, money flows actually increase.


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