Dubai’s property supply has been under the spotlight recently with various opinions being reported in the media, supply and demand, is always a leading factor in the condition of any market.
Dubai is different. It is a city that has been created within just a couple of decades wherein the construction started as a result of high demand. At the beginning of the creation of Dubai as the international hub as we now know it to be, there were, in some cases, more than 20 tenants to every property. Companies were willing to pay for the accommodation of their employees with 1 upfront payment for rent, which is when the 1-cheque payment scheme was born to beat all competition.
Throughout 2006-2009 this boom continued, with a large influx of residents. Owing to changes in the laws for ownership of companies, developers accelerated building and freehold ownership was opened up for global investment.
In my opinion, the reports that are being made now, are what we have been discussing for some time. The developers recommenced construction in 2011-2014, catching up on the construction halt post-2009. At the same time, the master developers released more projects off-plan with the anticipation of the market recovery close to 2020. Thus causing a spike of off-plan sales in 2014-2016.
In 2017 it became clear that the market will need more time to stabilize and many developers put the breaks on new releases.
There are so many factors other than supply to take into account as to why the market is slower: oil prices, drop in currencies, etc, just to name a few but for this report, I am solely looking at the population against the supply of property.
Currently, in the residential freehold areas of Dubai up from 2003 – 2019 there had been a supply of: (data from propertymonitor.ae) 251,590 residential properties including staff housing, apartments, hotel apartments, villas, and townhouses,
As of today, according to the Dubai Statistics Center, there are 3,363,689 residents in total in Dubai. As we do not have the exact breakdown of residents, we can fairly estimate that 30% of this figure are salaried residents living in the ‘freehold areas’ to be in line with the properties mentioned in the above supply.
30% of the current population is 1,009,106 residents. This leaves an average of 4 residents to every property that is already supplied.
Even if we take the unlikely scenario that no one new becomes a resident in the UAE in the next 3 years then the expected supply of 89,224 properties, will still be fit for the current ‘demand’.
By 2023 it is expected that the freehold areas of Dubai will have about 340,814 apartments, villas, townhouses, staff accommodation, and hotel apartments.
Looking back at the Population in January 2008, which was 1,533,596, still working along the lines of 30%, 460,087, being working professionals wanting to live in freehold areas, there were only 30,739 properties completed which clearly shows the high demand at the time. 14 people to each property completed.
With our current residents, we still have more than 3 people per unit. (calculated by taking only 30% of the current population into account).
So, what can we do about the supply and ensure that Dubai remains an attractive place to live and buy property for investment?
There are many reasons for Dubai’s current vacancy rates with regards to leasing, the main ones are payment options (cheques, too much money upfront leading to people sharing and so on), viewing timings/availability, inaccurate information, advertising power of the agency and too many agents being listed on one property.
I believe that we really need to be forward-thinking in this market and ensure that the current and past investors reinvest and tackle the current oversupply which will, in turn, benefit everyone.
We are at a stage now where the market is in need of revolutionary change, with growing expectations of landlords, tenants, and real estate professionals. New technology can help make renting easier, more honest and empower every party involved. And it’s here.
For more information, get in touch with us at Provident