Dubai house prices drop on oil slump and job losses

The pain in Dubai’s property market isn’t about to go away anytime soon.

Home prices are set to fall by 10% this year because of lower oil prices and a strong dollar-pegged local currency, which makes real estate in the emirate more expensive for international investors, according to Standard & Poor’s.

A slowdown in the hiring and expansion of companies is also putting pressure on the market, the ratings firm said in a report. Home prices slumped about 13% in 2015.

Dubai’s housing market, the biggest and most volatile in the Middle East, is in the doldrums as falling oil prices, a weaker euro and ruble and an abundance of properties damp demand.

Residential values fell 2.2% in the first quarter, according to consultancy Cluttons, which predicts villa prices will decline 5% this year and apartment prices by 3% to 4%.

“We are seeing some significant job losses among banks and other companies,” Jesse Downs, managing director at Phidar Advisory.

Dubai’s biggest developer, Emaar Properties, responded to a weakening Dubai housing market by implementing “severe cost cuts” chairman Mohamed Alabbar said this month.

“We were pleasantly surprised” as first quarter sales were good, “but we are working so much harder than before,” he said.

S&P said it doesn’t expect “major” negative movements in its real estate sector ratings over the next 12 months and that the developers it rates could absorb a 10% drop in prices.