By Md Manzer Hussain

BENGALURU, (Reuters) – Dubai’s house prices will rise in the coming years due to foreign investment. However, Reuters analysts cautioned that rising interest rates and a shortage of homes for sale could slow down activity.

Dubai’s property market saw an economic revival last year, with higher energy prices driving a rebound in tourism and trade. The Dubai property market is still showing positive momentum after a lengthy streak of losses.

According to a Reuters survey, 13 analysts covering the property market found that Dubai house prices rose 7.5% on May 11, 26 and 26, respectively. This is unchanged from the poll conducted two months earlier.

Market sentiment, lifted by the pandemic easing, “coupled with the successful hosting of the World Expo, the reopening of travel corridors…continues to underpin the market’s rebound,” said Faisal Durrani, head of Middle East research at Knight Frank.

According to data from Dubai Land Department, the sector’s realty sales had their best quarter in over a decade. Q1 saw the most transactions since 2010.

However, prices are expected to fall to 4.5% and 3.0% respectively in 2023/24 and 2024 to maintain stability on the market.

This contrasts with other properties markets, which experienced dizzying highs.

Haider Tuaima is director of ValuStrat’s real estate research. “What we saw last year was more about recovering from the pandemic. This year, it seems like there has been slower growth to healthy growth,” he said.

A majority (11 of 13) of those surveyed said that demand from foreign investors will be driving Dubai’s housing market in the next year. Two chose local demand.

This expected price increase, although modest, could pose a problem for first-time purchasers as the interest rate was expected to go up, which will affect affordability.

Dubai is still a very affordable market. Prices are well below their peak mid-2014. There are many downside risks, such as higher interest rates, a lack of housing supply, and rising inflation.

The majority of analysts that answered the additional question, except one, said it would become more difficult to buy a home for first time buyers over the next few years.

Strong two-thirds of respondents also believed that rents in Dubai will become more affordable over the next two year, as it houses many expatriates.

“Those looking to buy won’t be able to afford it and will need to live in rented apartments.” According to Lynnette Sacchetto of Allsopp & Allsopp, “Rents will rise, demand will grow, and this will contribute towards the overall cost to living increasing.”

(For additional stories, see the Reuters Quarterly Housing Market Polls:

(Reporting & polling by Md. Hussain; Editing done by Hari Kishan and Ross Finley, and Louise Heavens