Three weeks ago I commented on the Dollar Index breaking past the psychological 100 resistance level on an unchallenged path to 101.
Less than a month later, King đź‘‘ Dollar’s now reached 20 year highs. Most major currencies have been crushed in its path. Such is the current scale of market risk-off sentiment.
Besides soaring mortgage rates, treasury rates and high volatility; comes the drain on “perceived” wealth and trading income from the stock markets. A combined formula with significant slowdown effect on the economy. All this with only 2 hikes of 75bps total (so far).
Nael Mustafa – CIO Real Estate at GFH Financial Group
What’s this all mean?
Forget the 2008 Global Financial Crisis. Forget the peak-fear of Covid in early 2020.
The Dollar’s now at levels not seen since the systemic uncertainty that took hold in the aftermath of 9/11.
How’s this relevant to Dubai Real Estate?
In simple terms, the more expensive the dollar, (and therefore the Dirham), the less attractive Dubai Real Estate as an asset class. Demand…decreases.
To put this in perspective, at the time of writing, UK #Sterling and Indian #Rupee denominated investors had to respectively pay nearly 7% and 2% more to buy Dirhams, than they did 3 weeks prior.
That means the same property, asking the same price, now costs more for a buyer from Manchester or Mumbai.
How long the dollar stays high is unclear. It’s taking a breather, having been heavily overbought.
But its path of least resistance is north. Expect it to re-attack 105.
Pro Tips:
For short term traders. If you have any Dollar or Dirham liquidity, wait for 105 and sell your assets. Repatriate the proceeds into your native currencies, banking the capital appreciation and FX upsides. Double-whammy!
For long term Dubai Real Estate landlords. Expect the market to switch, from seller’s favour to buyer’s favour. But don’t panic. Jerome Powell & Co are doing a great job at managing market expectations. And locally; Dubai’s policy makers are doing everything to make the Dubai Real Estate market more resilient. There is a price correction in the short-term future. But unlike our previous cycles, this time we can expect a soft-landing.
An AI Implementation Strategist accredited by the prestigious MIT in Cambridge, Massachusetts, Ayman Alashkar also has a Bachelors Degree in Mathematics from the world-renowned Queen Mary College, University of London, and a Masters in Real Estate Investment and Development from the University of Reading (UK). With +20 years’ experience working in real estate, banking and artificial intelligence, Ayman is the founder and CEO of overwrite.ai.
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