Dubai property demand is ‘strong’
Demand for Dubai’s property remains pretty strong despite oversupply and demand-supply balance is likely to be achieved by 2022, say senior industry officials.
Stressing that oversupply is a concern, they, however, rule out slump in demand as approximately up to 30,000 units are said to be sold out in Dubai in 2019 alone. They believe that oversupply will continue beyond 2020, hence, curbs on supply over the next 12-18 months – not beyond that – will help bring balance on demand-supply front.
“There will be no significant upside after Expo 2020 as property sector might just sustain itself over the next couple of years because supply will continue coming in beyond 2020. Projects that are being built right now will be handed over in 2021 and 2022,” says Dounia Fadi, chief operating officer of Berkshire Hathaway HomeServices Gulf Properties.
“So, until the gap between supply and demand comes closer, that is where prices will see recovery. Until then, they will remain under pressure till that time. I believe, supply-demand will balance in 2022,” she said.
Hussain Sajwani, chairman and CEO of Damac Properties, sees no slump in demand but showed concern about oversupply.
Property prices have slid by around 25 per cent in Dubai since mid-2014, the peak from its recovery from the 2009 debt crisis. A Reuters poll has predicted that average property prices would decline 10 per cent in 2019 and five per cent in 2020.
“I don’t think there is a slump in demand because around 25,000 to 30,000 units to be sold in 2019. There is a demand and it will continue. The challenge we are facing is oversupply. If we control supply, prices will go back very quickly. We need to curb supply for 12-18 months – not more than that. The supply is not huge, but in the age of efficiency of information, price gets adjusted up or down very fast,” Sajwani said during a panel discussion hosted at the launch of The Report: Dubai 2020 by Oxford Business Group.
Property Finder Group recently revealed that residential sales transactions grew 33.46 per cent year-on-year during June to August 2019 period as Dubai recorded 8,833 deals compared to 6,618 in corresponding period last year. Similarly, home sales in Dubai also hit four-year peak in terms of value as deals worth Dh14.94 billion recorded in 2019 summer season compared to Dh12.58 billion in the same period last year, reflecting an increase of 14.94 per cent.
Global real estate consultancy JLL has estimated that the average level of residential completions in Dubai in the last three years was around 20,000 units per annum, while as many as 60,000 units are scheduled for completion in 2019 alone.
Measures have been taken at the emirate and the federal level to support the local real estate market. Dubai has established a high-level committee to bring balance in supply-demand while the Central Bank of the UAE is in discussion with local lenders to allow flexible cap on real estate financing.
Craig Plumb, head of Research for Mena at JLL, believes that restrictions in future supply are an essential part of creating a more balanced market.
He said weakness in underlying employment growth lies at the heart of the subdued demand for real estate and measures to create more secure and well-paid jobs would, therefore, provide the single biggest boost to real estate demand.
“A range of measures have been announced that will boost demand for residential property in the medium-term… What is now required is a relaxation of the rules relating to these regulations (eg: lower levels of investment required), so that these relaxations apply to a larger number of potential investors. Further improvements in the regulation, governance and transparency of the real estate market would also assist in stimulating additional demand,” Plumb said.
Firas Al Msaddi, CEO, Fam Properties, suggested that balance in demand and supply can be brought in by implementing control land release, boosting international demand and diversifying project types when it comes to purpose and permissions.