Iranian sanctions relief will not boost Dubai property market
Phidar Advisory has released research dismissing claims that the removal of some Iranian sanctions will unlock Iranian investment in the Dubai property market, saying that these claims have been based on the over-interpretation of a limited dataset. In fact, the agency reports that the price of Dubai property for Iranian investors is now 4.4 times higher than it was in 4Q 2010. Phidar concludes that Dubai property prices are likely to decline over the next two years.

Today, Phidar Advisory released a special research note on the impact of Iran sanction relief on the Dubai property market. The report responds to recent claims that Iran sanctions relief will unlock pent up demand from Iranian buyers.

“Analysis shows the notion of Iranian pent up real estate investment demand is likely a myth spawned by over-interpretation of a limited dataset,” said Jesse Downs, Managing Director of Phidar Advisory. “A deeper investigation of the data and context illustrates the low probability for significant short term gains from this policy shift as well as the importance of thorough research and rigorous analysis,” she said.

Dubai property is now 4.4 times more expensive for Iranian buyers in Rial than in Q4 2010. Since the end of 2010, the US Dollar (USD) and UAE Dirham, which is pegged to the USD, appreciated by approximately 195% compared to the Iranian Rial (IRR). Q3-15 Dubai property prices are still 49.7% higher compared to the end of 2010, as measured by Phidar’s Dubai Apartment Price Index.

“Indirectly, there will be a positive impact on Dubai’s GDP, which could bolster job growth and thereby owner occupier and rental demand,” said Ms. Downs. “Rather than augment a consistent trend, this will help offset slowed short to medium term economic growth caused by the low oil price, strong US dollar, and low emerging market investors flows.” she added.

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In Q1-15, Dubai’s GDP grew 3.9%, but according to Phidar analysis there is a 2-3 year lag between oil price adjustment and Dubai’s GDP, so the real impact could start in Q4-16. Additional capital inflows and job creation associated with Expo2020 planning and development will likely mitigate the impact, primarily starting in 2018.

“Until then, Dubai’s property markets will likely experience price decline over the next 2 years,” said Ms. Downs. “However, based on current global and local dynamics prices are unlikely to fall to the trough levels of 2010-2011,” she concluded.