What is the real supply situation in Dubai?

What is the real supply situation in Dubai?
By: Khaleej Times
Filed on October 28, 2015 | Last updated on October 28, 2015 at 07.56 am

A quick look back at the history of these reports and it quickly becomes clear just how far apart the predictions are to the actual reality of the number of delivered projects.

As with all real estate markets around the world, with all investment opportunities, sentiment is a key driver. That is particularly true of the Dubai real estate market. Views on whether prices are heading up or down are often driven by so-called “market research” and the media reflection of such. These are often presented as a fact without any effort to scrutinise the basis and reliability of the numbers.

Every few months, we see the latest reports on pricing trends, drawn up by consultancies who have a vested interest in the presentation of the numbers. These figures are, more often than not, taken from one source, or in some even more concerning cases, from listings on websites.

These figures drive the media’s thirst for statistics and numbers, and through them, potential investors’ response to the current status of the market.

A quick look back at the history of these reports and it quickly becomes clear just how far apart the predictions are to the actual reality of the number of delivered projects.

For example, we at Damac Properties announced to the market at the start of the year that we would handover between 2,000 to 2,500 units over the course of 2015. Of that number, around 1,500 would be in Dubai. We remain on target to achieve this figure.

Emaar Properties, another large developer in Dubai, has told the market it will hand over around 800 units in Dubai this year. That’s almost 2,500 units from the two developers that make up over 50 per cent of all the current inventory handovers in Dubai. So, it begs the question: where are the 25,000 total handovers in Dubai in 2015 that was predicted within market research reports?

As each quarter goes by, the figures are refined and reports now state that just 4,000 units have come online so far this year – with 6,000 more to come in the last 12 weeks of the year. Even if 6,000 units are handed over in the last three months of this year, which I very much question, that will be a total of 10,000 units for 2015 – much less than the 25,000 which was predicted in reports for the fourth quarter of 2014.

Such predictions help companies gain exposure and perceived authority, but they also have a detrimental effect on the generally positive sentiment in the market. They also have the danger of turning people away from what remains a strong and well regulated marketplace.

Data released by the Dubai Statistics Centre shows that the non-labour population jumped by over seven per cent in 2012 and 2013, while the number of households grew by 7.6 per cent in both years.

Based on the current population in Dubai of just over 2.4 million, we can anticipate more than 160,000 new residents will be coming to Dubai this year and more than 170,000 next year. Each of these new residents will need a place to live.

Adding 10,000 units a year to support such a growth in Dubai’s population does not seem such a huge addition – indeed, the same reports suggest Dubai had 448,000 completed units at the end of 2014, so adding 10,000 more units is just over 2.2 per cent; again, this does not sound a very large percentage, considering we are experiencing a population growth of five to seven per cent annually.

We are also not seeing any significant drop in rental prices at the current time, suggesting that, particularly in key areas such as Dubai Marina, JLT and the Burj area, there remains desirability for locations with completed infrastructure. The suggestion, even though it is a fallacy, that Dubai is set to be flooded with new homes is not affecting landlords’ ability to earn strong rental returns.

Rents are now running at the highest ever recorded in many areas – this would usually be a sign that there is a requirement for more housing, not less, to soften the growth in rental yields.

Dubai’s real estate market remains strong, with key areas seeing impressive capital growth, and new expansions to the city such as our Akoya by Damac master development starting to come online by the end of the year offering a new way of living, with attractive purchase prices.

To suggest that Dubai is to be flooded with further housing is professional malpractice. The Dubai government, through the Dubai Land Department and the Real Estate Regulatory Authority, are maintaining a sustainable level of development across the city to ensure that Dubai continues to grow into one of the most thriving and exciting cities on Earth. We should all support this vision through our words and actions.

The writer is managing director of Damac Properties. Views expressed by him are his own and do not reflect the newspaper’s policy.

Posted on October 28, 2015 in Dubai news, Property, Real Estate

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