Now Reading
Dubai’s real estate space: Is demand catching up?

Dubai’s real estate space: Is demand catching up?

As demand starts to rally, developers need to ensure they keep pace with the changing requirements from investors

The moot point of any discussion surrounding Dubai’s property market – for some years now – has been the topic of oversupply, especially in the residential space.

According to a recent report by Knight Frank, new supply in Dubai’s residential space has grown steadily – from 12,900 units in 2015, to 18,100 units in 2016, 27,700 units in 2017 and 28,500 units in 2018.

The number of new homes forecast for completion in Dubai this year is 50,700 units – marking an increase of 40 per cent from the roughly 36,300 units added to the market in 2019. The report, which looked at property hubs across the globe, found that Dubai came second on the list (after Hong Kong, at 53 per cent) when it came to the addition of new residential supply for 2020.

However, due to the current economic situation caused by the pandemic, fewer units could actually be completed as compared to the forecast, the report added.

With the market witnessing a slump in property prices during the last few years – driven to an extent by oversupply – Dubai also announced the formation of a new real estate committee to ensure balance in the emirate’s property market in September last year.

Headed by Dubai’s Deputy Ruler Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, it includes senior developers and is tasked with creating a “comprehensive strategic plan and vision for all major real estate projects in the emirate for the next 10 years”.

It will also ensure that semi-government real estate companies do not compete with private developers. While 2020 had a good start for Dubai’s residential market – primarily because of expectations surrounding Expo 2020, the Covid-19 situation dampened the market in the second quarter. However, transaction numbers gradually increased during the third quarter, pointing towards demand returning to the market – especially in certain areas within the emirate.

“While oversupply is a genuine problem within the Dubai property market, it is not a general one as there are pockets of areas where stock is actually not readily available enough to satisfy the demand and it is in these areas that bidding wars between buyers can happen,” explains Mario Volpi, sales and leasing manager at Engel and Volkers Dubai.

While many developers have focused on completing old projects, the market has also seen the sales launch of some new developments this year. In September, Majid Al Futtaim said the third phase of the Elan project at its flagship Dubai community, Tilal Al Ghaf – including 322 homes – sold out in 48 hours. Meanwhile Azizi Developments also announced last month that it is seeing strong demand from international investors for its recently launched Dhs350m Creek Views II development, located in Dubai Healthcare City

So far, 30 per cent of units have been sold to Israeli investors, 30 per cent to UAE nationals, and 20 per cent to Saudi citizens.

“I firmly believe that now is the right time to launch new projects. Indeed, we are receiving numerous sales enquiries on a regular basis, with demand for our developments remaining
extremely robust. To cope with the consistent demand, our sales office is now open seven days a week and we have increased the amount of staff,” states Abdulla bin Sulayem, CEO of Dubai-based developer Seven Tides.

“Why is that? In my opinion, many investors are now risk averse and real estate as an asset class is clearly very popular for those with a cautious mid to long term strategy and with good reason. It can provide stable longer-term yield and of course there is the added advantage of capital gains.

“Specifically, with off-plan investments, payments are staggered over the period of the build and beyond in some cases. The advantages are clear, investors hold the current sales price,
protect their liquidity and only pay when the development is handed over and a tenant can be moved in. That is in contrast to the financial markets which are still somewhat volatile,
while bonds offer little in the way of return,” he opines.

The developer is currently focusing on its two new developments, Seven Palm and the newly-relaunched Golf Views Seven City. Seven Palm, its third Palm Jumeirah project, is due
for completion by Q2 2021. Located in JLT, the Dhs1bn Seven City development, the company’s first mixed-used project, has a total built up area of up to 3.5 million square feet and is scheduled for handover by the second quarter of 2023.

“In terms of demand, Dubai will recover, in fact it is already beginning to recover thanks to our dynamic and decisive leadership. However, another reason why Dubai and the wider UAE will flourish post-pandemic is the absence of property tax. Many governments across the world will need to raise tax revenues to pay back the huge amounts of money they have borrowed to finance their way through the pandemic. Potentially, these higher taxes may well encourage high net worth individuals, entrepreneurs and businesses to consider relocating to Dubai to take advantage of our tax-free property environment and quality of life,” adds Sulayem.

Changing demand
As demand starts to pick up, developers now need to ensure they keep pace with the changing requirements from investors.

“Developers should keep in mind that buyers are looking for ready units with post-handover payment plans so this should be part of any future project launches,” says Volpi.

In terms of ROI to differentiate their project, developers must also offer a compelling proposition, based on build quality, return (mid to long term) and potential capital appreciation,
opines Sulayem.

“In addition, and wherever possible, create a unique customer buying experience through technology (virtual walkthroughs, 3D virtual tours, contactless payments, etc). This is particularly pertinent today, following all of the restrictions associated with the pandemic.”

You might also like

© 2020 MOTIVATE MEDIA GROUP. ALL RIGHTS RESERVED.

Scroll To Top