Govt’s stimulus to boost realty demand
11%
Jump in residential supply is likely in Dubai by 2020
“There’s no doubt that the new government initiatives will increase demand for real estate, whether it’s the 10-year visa for investors, specialists, scientists and outstanding students or the 5-year visa targeting people aged over 55 wishing to retire in the country. However, these are strategic initiatives aimed as a longterm contribution to the economy,” said Haider Tuaima, head of real estate research, ValuStrat.
Abdul Kadir Faizal, co-founder of Smart Crowd, said demand will increase as more investors make Dubai their long-term home and new businesses set up here due to the 100 per cent foreign ownership. “This will create an environment for entrepreneurship and great employment opportunities in the market,” Faizal observed.
According to JLL, around 22,000 units were delivered during 2018, which is the highest for the last five years. This brought the total residential stock to 520,000 units at the end of 2018. While JLL estimates more than 60,000 units to be delivered in 2019, actual completions are likely to be far less, with the average materialisation rate over the past five years being less than 50 per cent.
Residential supply in Dubai is expected to reach 637,000 units by the end of 2020, representing an average annual increase of 11 per cent. Dubai’s population in 2018 was 3 million and it is estimated to hit 3.2 million by 2021.
According to government sources, 200,000 people have moved to Dubai on average in the past five years. However, a vast majority of this has been blue-collar workers. Dubai has seen a 7.6 per cent growth on average in its population in the past five years. There are concerns of supply increasing ahead of demand, with anecdotal evidence suggesting an oversupplied market resulting in further downward pressure on both prices and rentals.
The residential market in Dubai remains buyer friendly, providing attractive sales opportunities for new entrants to the market. Traditionally, the majority of expats have preferred renting to owning their home in Dubai, but this attitude is changing as a result of attractive payment plans from developers and the availability of longer term residency visas.
According to JLL, both sales prices and rents declined in 2018, with apartments recording average declines of 8 per cent in sale prices. Similar declines were experienced in the villa market with sale prices declining by 9 per cent in 2018. With supply expected to increase further, sale prices will continue to face downward pressure in 2019.
“Absorption demand for the expected glut of new housing supply over the next few years will likely depend on high population growth, households moving from being tenants to home owners and residents shifting from the northern emirates towards Dubai due to improved affordability,” added Tuaima.