Massive surge in supply soon
With the UAE realty market making a complete recovery from its 2008 slump, there has been a steep hike in demand for property.
In fact, in a recent report, HSBC Global Research said the emirate would see 90,000 new units by 2018, all of which would be absorbed fairly easily into the market even if the population grows less than 5% per year. Assuming an average household size of 4.4, the report estimates that the Dubai population would need to increase by 300,000 people by 2018 in order to absorb all the new supply. As per figures from the last few years, growth in population has slowed down in the city.
"We assume that 30% of this new supply will be bought by foreigners who intend to use them as second homes, which they will not rent out," HSBC said in its report, pointing out examples of Damac and Emaar statements claiming that a large portion of sales are made to second-home buyers.
At the same time, Dubai needs 260,000 new affordable homes to be built over the next six years, according to urban design consultancy Placemaking co-founder Nadine Bitar. "Affordable housing is a large market potential and our numbers justify it." She suggested that specific zoning can help ensure that a certain percentage of units are dedicated to affordable housing while developers can also be offered other incentives such as dispensation on parking bay numbers and an increase in plot ratio. "We need, at least in the beginning, incentives to encourage developers not only to build the units, like, for example, The Greens by Emaar or International City by Nakheel, but we also need to encourage them to manage it in a way that stays affordable."
Currently, the market focus has been on luxury property. In fact, an apartment sold in Burj Khalifa recently sold at AED60 million or AED5,284 per square foot - making it the biggest apartment deal in the first quarter of 2014.
Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. With the rising demand for new property, the market's recovery has been made even more apparent. Dubai's bourse rose to a new multi-year high recently on the back of banking and property stocks, adding 1.2% on increasing turnover and reaching its highest levels since September 2008. In the coming months, the most interesting thing to watch out for is the assessment of which of these new developments will be trending. We will be sure to follow up on all news related to new projects and keep our readers updated.