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Weakening dollar boon for Dubai's property market, say analysts

Waheed Abbas/Dubai
Filed on August 19, 2020

(KT file)

The weaker dollar has proved to be a boon for Dubai's real estate sector, attracting investments from overseas investors during the last few months.

Analysts said that the inflow of foreign investments into the emirate's vital sector could pick up in the near future because the greenback is projected to weaken further.

Since the dirham is pegged to the US dollar, the UAE currency follows any fluctuation in the dollar. The dollar, hence dirham also, has weakened by 12.2 per cent against the euro in the past five months, falling from 1.06 on March 20 to 1.19 on August 18. Similarly, the dollar has lost 15.78 per cent against the UK's pound. This effectively made buying property or any other assets in the UAE cheaper by over 12 per cent and 15 per cent for European and UK investors.

"Since mid-March, investors from Switzerland, the UK, Germany, and Italy have been able to take advantage of gains made by the Swiss franc, sterling and the euro, as the US dollar weakened over the past four months," said Sean McCauley, CEO of Devmark.

"Subsequently, development projects in Dubai have, in effect, become 14.8 per cent and 11.2 per cent cheaper depending on whether you are buying in euros or sterling. Indeed, UK investors, for example, buying in pounds could now save over Dh185,000 when buying a one-bedroom luxury apartment, at the Address Jumeirah Resort, once compared with the exchange rates at the beginning of March," added McCauley.

According to Reidin, the total value of real estate transactions in the Dubai residential market still closed just shy of Dh10 billion in the second quarter of 2020 despite the lockdown. Although transaction value is down by 40 per cent year-on-year, the volume of transactions was marginally up in May and June.

"Many market watchers are predicting that the dollar will soften by a further 1.75 per cent by the end of this year, so it could be fairly safe to assume that Dubai's property market will benefit from these financial market dynamics, for some time to come," added McCauley.

Analysts that the uncertainty surrounding US economic recovery and US stimulus package are weighing on the greenback.

"There is a strong momentum for investors to want to sell the dollar," said Juntaro Morimoto, an analyst at Sony Financial Holdings, pointing that the greenback has been declining since last month.

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