Property prices in the UAE will remain steady over the next three years and will prove to be a drag on economic growth, according to a survey of investment professionals in the Middle East.
Of the 166 CFA Institute members surveyed between January 13 and 22, 57 per cent said they expected real estate prices would not increase and 40 per cent believed it would affect economic growth.
Amer Khansaheb, the president of CFA Society Emirates, said it was high time property prices fell. “Prices have increased so much over the past year that they are threatening the competitiveness of the UAE in terms of cost to different companies,” he said. “At a certain point when living costs become too high, companies will have to relocate.”
About 88 per cent of respondents said that the fall in oil prices was not beneficial to the sustainability of the UAE economy.
Half of the participants expected the oil price to range between $61 and $90 a barrel this year.
One-third of UAE respondents said that UAE finances would tighten if oil prices fell to between $31 and $40 a barrel, and the rest predicted this would happen if oil prices fell to between $41 to $50 a barrel.
Oil prices, which have more than halved since peaking at about $115 a barrel in June last year, have recovered a little over the past two weeks as the recent oil price slump begins to affect production and investments of oil firms. Regionally, 47 per cent of those surveyed predicted that global equities would provide the biggest return on investments this year.
About 31 per cent expected regional equities to do so and a quarter expected real estate to provide the highest total return.
One third of respondents said commodity prices provided the most insight into potential near-market corrections, while one-third picked equity markets as a metric and 27 per cent picked real estate as the best indicator of near-term economic corrections. These indicators are not sufficient to gauge the health of the economy, according to Mr Khansaheb. The UAE economy needed indicators such as job growth, salary growth and factory production, among others.
“What we are lacking here in the UAE is proper statistics on proper economic indicators,” said Mr Khansaheb.
Better gauges for the economy include credit growth, bank deposits growth and other financial indicators, he added.
dalsaadi@thenational.ae
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