KHALEEJ TIMES, Monday, Oct 12, 2020 | Safar 25, 1442
Dubai to see considerably slower supply over the next 5 years
Emirates:
New residential property supply in Dubai continues to decline, and the
pipeline for the next five years also shows the number will drop
considerably, especially in the villas and townhouses segment, say real
estate consultants.
According to real estate consultancy Core, the residential units' supply is
expected to reach 32,000 units by the end of 2020 as compared to initial
estimate of 49,000 at the beginning of the year.
Dubai saw nearly 21,500 units come to market in the first nine months of 2020,
bringing total residential stock to 571,500 units. Furthermore, there are over
10,500 units expected to be handed over in Q4 2020, making the total 2020
deliveries to 32,000 units.
"While there are other factors at play such as lower realisation rates over the
past several years, we have seen the impact of Covid-19 cause a significant
slowdown in handover volumes," said Prathyusha Gurrapu, head of research and
advisory at Core.
"The government is implementing many demand drivers to spur recovery including
the recent retirement visa regulations which is expected to create long-term
demand as more resident expats and international buyers choose the UAE to settle
down, thus contributing to sustained inward investment and population growth,"
she added.
"There are a few factors at the moment that will be affecting the supply in the
real estate market but I would say that the higher committee of real estate
certainly seems to be having an impact. If we take some information from Data
Finder, we can see that from October 2017 to October 2020 there were 334
projects that were completed in Dubai," said Lewis Allsopp, CEO of Allsopp &
Allsopp.
"By project, we're talking about individual towers or smaller villa communities,
not 'master' developments. If we look ahead for the next five years, from
October 2020 to October 2025, we can see that there are 176 projects scheduled
for handover. So, the supply is reducing considerably," he added.
"We've been saying for a little while now that we can no longer talk about the
Dubai property market as a whole and that we need to talk about different areas
or segments to be able to give more detail and a fairer picture. What we're
seeing at the moment is an undersupply in villa communities, which in some areas
has led to up to a 10 per cent price increase in the last few months. Over the
next 5 years, there will only be a total of 43 villa or townhouse communities
handed over," he added.
"There is a slightly different picture on the apartment front with more
projected handovers, but most are for projects that were launched before the
higher committee for real estate came into being and we're still seeing
considerably reduced numbers here," said Allsopp.
Core said with many districts transacting nearly 35 per cent lower than their
2014 peaks, sales prices remain at a cyclical low.
"As capital values now near the 2011 trough, we continue to see investor buyer
interest remaining strong, particularly for competitively priced ready units.
Historically, institutional investments have been limited in the UAE primarily
due to the lack of investment-grade stock, despite strong demand. However, we
now see institutional interest piquing as few existing developers and corporates
are making assets available for disposition as occupiers look at focusing on
core business lines and assets," Core said.
In Q3 2020, secondary market transaction volumes saw a 6.5 per cent increase
compared to Q1 2020 due to the release of pent up demand built over a subdued Q2
2020. Interestingly, Q3 2020 transaction volumes were up by 10 per cent from Q3
last year.
"Despite the rise in secondary transaction volumes, sales prices continue to
follow a downward trajectory with almost all areas showing sharp double-digit
year-on-year drops. On the other hand, off-plan market activity is facing an
interim lag in transaction volumes as buyers are increasingly preferring ready
units to avoid further uncertainty and delays that may be expected from the
off-plan market," said Gurrapu.
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