Medium- to long-term demand fundamentals remain strong for the real estate market in Dubai, UAE, despite key challenges in 2017, said a report by global business advisors Deloitte.

The 'Middle East Real Estate Predictions: Dubai 2017' report, which reviewed key trends in Dubai’s residential, retail, hospitality and office markets during 2016, has made predictions on how the markets could perform in 2017.

Deloitte’s predictions from January against actual market performance for the first quarter of 2017 were recently compared.

Martin Cooper, the director of Real Estate Advisory for Deloitte, said: "As we had set out in our January report, Dubai’s real estate market continues to face headwinds. These headwinds include declining investor confidence and, off the back of a strong Dirham, declining purchasing power for many foreign investors and visitors."

"Despite this, medium-to-long demand term fundamentals remain strong as Dubai consolidates its position as a leading city in the region for attracting investment, tourists and highly skilled expatriate workers," he added.

On Dubai’s hospitality market, Deloitte predicted continuing headwinds in 2017.

The most recent data from STR indicates that the Dubai-wide ADR (average daily rates) has declined by 4.9 per cent for the year to date February 2017 when compared to the same period in 2016.

Operators in Dubai are continuing to discount ADR to preserve occupancy levels, which in turn support non-room revenues such as Food & Beverage, stated the report.

Grant Salter, the director of tourism, hospitality and leisure for Deloitte, said: "Despite an ongoing decline in ADRs Dubai remains one of the world’s top tourism markets, both in terms of international overnight visitor numbers and hospitality performance metrics."

Salter pointed out that data from MasterCard shows that Dubai was ranked fourth in the world for international overnight visitors in 2016, behind only Bangkok, London and Paris and ahead of New York.

Data from Oxford Economics forecasts that Dubai’s population will increase from 2.6 million in 2017 to 2.9 million in 2021, as the city continues to attract expatriate workers.

With regards to Dubai’s retail market, Deloitte predicted that 2017 would be a challenging year for retailers as domestic disposable incomes are squeezed and a strong Dirham erodes the purchasing power of international visitors.

Despite this, prime retail assets in Dubai are likely to consolidate their position and continue to attract strong levels of footfall and tenant demand, he stated.

On Dubai’s residential market, Deloitte said the sales prices would continue to decline in 2017, driven by low oil prices denting investor confidence in addition to a strong local currency reducing the purchasing power of key international source markets such as India and the UK.

Data from Reidin indicates that in February 2017, average residential prices in Dubai declined slightly, by approximately 0.31 per cent, while average residential rents declined by approximately 0.16 per cent.

This shows that the rate of sales price decline in Dubai is slowing, when compared with recent trend performance, stated Cooper.

"Dubai’s real estate market continues to face many of the headwinds previously predicted in Deloitte’s report in January 2017," he added.-TradeArabia News Service