Dubai’s real estate market, where house prices have continued to rise by double digits, remains fairly valued and price momentum should remain strong in the coming quarters, according to UBS’s 2023 Global Real Estate Bubble Index.
The investment bank said real house prices in the emirate have continued to rise by double digits.
“Given strong income growth and a red-hot rental market, with rental growth even exceeding purchase price growth, we consider the market to be reasonably valued,” the bank said.
“While Dubai is highly cyclical and prone to overdevelopment, price momentum should remain strong in the coming quarters.”
Of the 25 cities UBS surveyed worldwide, Dubai was one of nine where house prices are reasonably valued, the bank said.
Only Zurich and Tokyo are at risk of a housing bubble, while the other fourteen cities have overvalued house prices, according to UBS.
San Francisco, New York, Boston, Sao Paulo, Madrid, Milan, Warsaw and Singapore are the other cities with homes that are “fairly valued” according to the bank.
UBS said real house prices in the cities it surveyed fell by 5% on average between mid-2022 and mid-2023 and there is likely to be further downward pressure on prices.
The rise in global inflation over the past two years has, on average, led to a sharp decline in imbalances in the housing markets of global financial centers, the bank said.
Claudio Saputelli, head of real estate at UBS Global Wealth Management’s Chief Investment Office, said: “In inflation-adjusted terms, prices are now actually 5% lower than in mid-2022.
“On average, cities lost most of the real price gains made during the pandemic and are now back close to mid-2020 levels.”
(Reporting by Imogen Lillywhite; Editing by Seban Scaria)