Dubai housing market braces for oversupply
dubai — With Dubai developers on a project launch spree in 2017, several thousands of units are expected to be released to the market by 2020. This could result in a situation where supply outpaces demand.
According to a JLL report on Monday, 570,000 units of new supply could enter the market by 2020, representing an average annual increase of eight per cent. Citing an Oxford Economics study, JLL says Dubai’s population is expected to grow an average of three per cent per annum. This suggests that market absorption rates will be less than the levels of new supply and thus a large number of residential units may be left vacant.
However, going by the past few years, it is unlikely that all these projects will complete on time. JLL believes only 40 per cent of the total proposed supply of residential units in Dubai has actually materialised over the past five years.
The total residential stock in Dubai is estimated at 491,000 units at the end of 2017. Key projects which were completed include Duja Tower in Trade Centre (679 units) and The Polo Residence in Meydan (598 units). 2018 will likely see up to 17,000 apartments entering the market, estimates the consultancy.
Although 2017 witnessed a slew of project launches in Dubai, their number was significantly below peak levels seen in 2006/2007 and the volume and value of sales were also below levels recorded during 2013/2014.
Both sales prices and rents declined over the year, but the rate of decline slowed over Q4. As the market absorbs additional units, it is expected that prices will continue adjusting (downwards).
“The UAE real estate industry is entering into a transitional phase, with VAT now in effect and key stakeholders seeking to decipher its immediate and longer term impact. Although VAT does not apply to residential rents and sales of new residential property, other real estate sectors could be negatively impacted by increased costs and cash flow challenges,” said Craig Plumb, head of research at JLL Mena.
Abu Dhabi
There were 3,000 residential units delivered in Abu Dhabi during 2017, with 88 per cent of completions being apartments, bringing the total stock to approximately 251,000 units. Future supply is expected to shift to the New Islands (Saadiyat Island, Reem Island, Yas Island and Raha Beach), comprising more than 60 per cent of projects currently under construction.
Sharjah
Congestion in the older residential locations in the western parts of the emirate has led a significant shift in population to more eastern locations. A big change in the Sharjah residential market results from changes to the property ownership laws introduced in 2014 to allow non-Arab expatriates to purchase property.