Khaleej Times, Monday, Nov 21, 2022 | Rabi Al Thani 26, 1444
Dubai residential units supply unlikely to meet rising demand this year
Emairtes:
The Dubai residential market is expected to see lower deliveries this year
despite strong demand as rising construction costs and supply chain issues are
impacting project delivery timelines and further increasing sales price, says a
report.
The apartments and villas are expected to face shortage of at least 15 per cent
residential units as developers will be able to deliver only 32,500 units
compared to an estimated 38,000 planned this year. About 5,700 residential units
were delivered in Dubai during the third quarter, totalling to 19,000 units
delivered in 2022 is far while another 13,500 units are expected to be delivered
in fourth quarter, according to the latest Core's Dubai Market Update report.
"This is a first downward revision that we have witnessed in our yearly
forecasts since 2016. However, many developers are accelerating their completion
timelines and aiming to handover projects sooner than anticipated due to
positive market conditions," Prathyusha Gurrapu, head of Research and Advisory
at Core, told Khaleej Times.
The Core's report pointed out that most deliveries continue to be in the
apartment segment with only 22 per cent of year-to-date deliveries being villas.
"Villas in master developments offering a variety of amenities and a sense of
strong community remain the main focus for residents, creating a supply deficit
and continuing the upward pressure in villa rents and sales prices," the report
said.
Where the most units delivered
The highest number of handovers were witnessed in Mohammed Bin Rashid (MBR)
City, Dubailand, Business Bay, Downtown Dubai and Jumeirah Village Circle. Major
deliveries included The Grand at Dubai Creek Harbour, Avencia and Aquilegia in
Damac Hills 2, One Park Avenue in Sobha Hartland, Golf Grove in Dubai Hills
Estate and Le Pont in Port de La Mer.
“Over fourth quarter of 2022, we foresee MBR City — which includes, Dubai Hills,
District One, Sobha Hartland and Azizi Riveria — to lead supply delivery,
accounting for nearly 54 per cent of all expected handovers, followed by
Dubailand, Jumeirah Village Circle, World Islands and Jumeirah Village Triangle,
according to the report.
Project delays
Haider Tuaima, director and head of Real Estate Research at ValuStrat, said
residential supply is expected to see a downward revision as some projects may
face delays in completion this year.
“Our records show that 16,000 apartments and 3,500 villas were completed during
the first nine months of this year. This represents 41 per cent of the total
completions anticipated for this year,” Tuaima told Khaleej
Times recently.
“Based on developer completion schedules, the total number of homes to be handed
over in 2022 to be just under 48,000 homes. Realistically, its highly likely
that some projects may witness delays of up to 18 months, therefore the
estimated total maybe adjusted downwards once the year has ended,” he said.
In reply to a question about the supply of residential units is good enough to
cater to the rising Dubai population, he said the Dubai residential market
continues to suffer from an oversupply of apartments within the E311 and E611
corridors, this situation is expected to remain in the medium term.
“We do believe that there are pockets of undersupplied homes, particularly for
the prime-located high-end submarket. This is why, we see homes located in Palm
Jumeirah, Emirates Hills, Dubai Hills, Jumeirah Bay, Blue Waters Island, and
City Walk continue to enjoy capital appreciation,” he said.
Rising population
Imran Farooq, chief executive of Samana Developers, also acknowledged that
supply of residential units is less than extra ordinary demand of the Dubai
properties this year.
“To cope with the demand, Dubai needs more inventory to accommodate new people
and their families to Dubai,” Farooq told Khaleej Times.
“Supply needs to catch up to rising population and keep the supply and demand on
sustainable level. Right now, the supply is enough but it must add more
inventory for upcoming season, returning residents and new people from all over
the world,” he said.
Ata Shobeiry, chief executive of Zoom Property, said the higher interest of
investors and buyers has resulted in a higher supply of apartments and villas.
He said several developments are still underway, which will lead to a further
increase in the supply.
“Dubai anticipated the delivery of around 38,000 residential units in 2022. MBR
City, Downtown Dubai, Dubailand, JVC, Al Jadaf, Dubai Creek Harbour, and
Business Bay are among the top areas that are expected to receive the highest
delivery of these units in 2022,” he said.
About the rising population and limited supply of residential units, he said
this is a little tricky situation since a higher supply often leads to adverse
situations, which the Dubai property market has already witnessed in the past.
However, with the rising population of the emirate, having an increased supply
has become the need of the hour.
Supply-demand balance
David Abood, partner at real estate consultancy Core, said over 19,000 units
were delivered year-to-date in 2022, while a further 13,600 units are expected
to be delivered in the fourth quarter, moving our 2022 supply estimates to
nearly 32,600 units.
“While these estimates are lower than what was initially forecast at 37,000, due
to the positive market conditions many developers are accelerating their
completion timelines and aiming to handover projects sooner than anticipated,
provided they aren’t facing any supply chain issues and construction delays,” he
said.
“Looking back at three years’ supply (2019,2020 and 2021) and estimated current
year supply, the residential delivers each year have in range of 35,000 units.
As per Dubai 2040 Urban Masterplan, Dubai aims at catering to a population of
5.8 million from the current population of 3.5 million. To cater to the
additional 2.4 million residents in the next 18 years, nearly 30,000 additional
residential units are required each year (with a typical household unit size of
4.3). With current rise in launch volumes and sustained demand for residential
units, we expect overall supply volumes to be at par with demand in the mid-long
term,” Abood explained.
Dubai real estate in demand
Ayman Youssef, vice-president, Coldwell Banker, UAE, said the real estate
industry has witnessed an increase in prices across all property segments this
year due to the relaxation of Covid restriction and the announcements made on
new visa categories.
“The shortage in villas, townhouses continued to push the prices up in the
segment. Though this trend was not as aggressive in apartments we did witness a
steady increase in demand for luxury serviced residences and sea-facing
apartments,” he said.
He said the affordable property segment on the other hand witnessed a moderate
price increase. “Villas in Dubai Hills saw 35 per cent increase in price year on
year and frond villas in Palm Jumeirah at 25 per cent,” he said.
In reply to a question, he said the total number of delivered units for this
year is expected to 25,854. “At the moment, the supply of residential units
looks good, though there is a shortage for beach facing properties in the villa
segment,” he said.