A report on CNN Money discusses how declining oil prices can negatively affect home values in real estate market in the U.S. According to the news site, the cheap oil can cause the loss of jobs that will lead to a drastic decline in spending power. This then will lead to decrease in demand for housing in the markets that are dependent on oil production for jobs and revenue. With decreased demand, home values will eventually fall, that is why cheap oil is a problem for these markets.
On the other hand, the UAE real estate market might not be sharing that same concern. At least for now. According to Trade Arabia, the real estate sector of UAE is still stable despite the dwindling oil prices. Their developers seemed to have found a way to adjust to the low oil prices and decrease government spending. According to the publication, the developers have reduced production of inventory.
For example, only 8,000 residential units were reportedly completed last year in Dubai and Abu Dhabi. Compared to the number of residential buildings erected in 2014, last year's production was only roughly 50 percent. This is how developers responded to the slow economic growth, which is predicted by property expert Jones Lang Lasalle (JLL) to continue through 2016.
The decline in investor's sentiment in UAE's residential housing sector was forced by the decline of oil prices and decrease government spending amidst the strengthening U.S. dollar that is making the UAE real estate pricier for outside investors.
Speaking about the Abu Dhabi market, David Dudley, the international director and head of Abu Dhabi office at JLL Mena said, "The residential sales market boomed during 2013 and 2014 with 25 per cent annual growth and a major increase in transaction volumes."
"As the market softened during 2015, prices have remained stable but transaction volumes have dropped significantly. During 2016, we expect transaction volumes to remain low with a slight reduction in prices in some market sub-sectors."
