The slowdown in job growth has sunk the prices of residential properties in Dubai and Abu Dhabi. The prices of real estate in Dubai sank 7.4% and in Abu Dhabi 6.1%. In the last quarter, the prices fell 5.8% in Dubai. This was announced by the UAE central bank. Prices have been falling since 2017 as the supply outnumbered the demand in the housing market.
The main factor behind the weakening demand for real estate is poor employment growth in the UAE, particularly among white-collar workers who might buy homes. The job growth fell to just 0.6% in the third quarter of this financial year. This is the slowest rate of jobs in last four years.
According to figures released by UAE central bank, in the first nine months of 2018, employment grew at an average rate of 1.6% against a 2.6% increase in the same period of 2017. The central bank figures showed employment in sectors including construction and real estate continuing to expand, partly because of Dubai’s preparations to host the Expo 2020 world fair.
The services sector is the largest generator of better paid jobs in Dubai but the job growth has slowed down in this sector. This is the biggest fall in the job growth in recent years. In an effort to fuel growth of better paid jobs, the UAE government last week announced a scheme to offer long-term visas to rich property investors, senior scientists and entrepreneurs.
But eligibility for the visas is tightly restricted and they do not offer a path to UAE citizenship, so analysts said the scheme might do little by itself to change employment or real estate market trends. Majority of workforce in Dubai are foreigners and only better paid white collar managers and supervisors can afford to buy a flat in Dubai or nearby emirate.
The other factor in the slowdown of real estate demand is the anti-corruption and anti-money laundering efforts by Pakistani and Indian governments. The PTI government in Pakistan has launched major campaign to identify the Pakistanis who bought properties in Dubai illegally without paying taxes in Pakistan. Pakistani nationals are the second most prolific buyers of properties in Dubai just behind Indian nationals.
The campaign of PTI government has stopped many Pakistanis to buy the properties in Dubai. This factor also contributed in the lower demand of houses and flats. The rich Pakistani nationals played an important role in the growth of real estate sector in UAE as they use to buy many houses and flats. Many rich Pakistani businessmen and professionals moved to Dubai when law and order situation worsened in Karachi and other parts.
The restrictions imposed by the PTI government on the money-laundering by the Pakistanis who are buying properties with ill-gotten money is going to affect the real estate market in Dubai.
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17 November, 2019