Iran sanctions relief is unlikely to revive the property market in dubai, UAE, as the real estate prices are now more expensive for Iranian buyers in Rial than five years ago, said industry expert Phidar Advisory.

A specialist on the UAE real estate industry, Phidar Advisory released a research note in response to recent claims that the 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,” remarked Jesse Downs, the 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 stated.  

Dubai property is now 4.4 times more expensive for Iranian buyers in Rial than in the fourth quarter of 2010. Since the end of 2010, the US dollar and UAE Dirham, which is pegged to the dollar, appreciated by approximately 195 per cent compared to the Iranian Rial (IRR), said the research note.

The property prices in the third quarter of 2015 are still 49.7 per cent 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,” explained 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.

In the first quarter, Dubai’s GDP grew 3.9 per cent, but according to Phidar analysis there is a two to three-year lag between oil price adjustment and Dubai’s GDP, so the real impact could start in the fourth quarter of 2016.

Additional capital inflows and job creation associated with Expo2020 planning and development will likely mitigate the impact, primarily starting in 2018, said the UAE property specialist.

“Until then, Dubai’s property markets will likely experience price decline over the next two years,” observed Downs.

“However, based on current global and local dynamics, the prices are unlikely to fall to the trough levels of 2010-2011,” she added.-TradeArabia News Service