Dubai property supply-demand seen levelling off in 2022 onwards

Residential property supply in Dubai will remain strong this year and the next, but handovers will slow down from 2022 onwards as new project launches have dropped significantly in the last couple of years, say property developers.

Developers claim that around 40,000 units will be handed over in 2020 and the around the same number of deliveries will hit the Dubai residential market next year as well.

Farooq Syed, chief executive of?cer of Spring?eld Real Estate, sees supply levelling off in a year or two and then prices will start to shift upward.

"The market is coming down slightly year-on-year. In the last 2-3 years, we have not seen as many launches as we saw in 2016-17. In 2019, 2020 and even in 2021, we will see higher number of deliveries. In 2020, 40,000 units are going to be handed. But in the 2022, 2023 and 2024, we will see a lot of less property coming to the market as compared to 2019-20," Syed said during a recent webinar.

"I don't believe this 40,000 numbers will stay over the next 2-3 years and that is why we see supply, which is going up, will be levelling off as demand will start picking up," he added.

According to ValuStrat, around 56,916 apartments were handed over in 2019, and the numbers are likely to fall to 34,917 in 2020. But the number will rise again to around 68,128 next year.

Harry Tregoning, managing partner at Tregoning Property, is also quite sanguine about the outlook for the secondary market over the next two years.

"I feel very positive and I am pretty buoyant about the market here," he said during the webinar held to discuss Dubai's property market.

Maysa Sabah, senior associate for urban planning at AECOM Middle East, said there is more focus on creating communities and linking all these of them together to create sustainable and not just building affordable communities.

How low can the property go?

Currently, Syed said, average sale price in Dubai is a little below Dh1,000 and Dh900 per sq ft is average selling price.

"With price at this rate, we are not going to see too much downside or too many developers coming up with many new developments. Because it is not profitable to do so right now," he added.

"On average, it takes three years to develop a property. If it is costing Dh750 per sqft, the developer needs 30 per cent return over three years - 10 per cent each year - to have a cost of running his business. So we don't see prices go that much below. Previously, with prices averaging Dh1,600-Dh1,700 per sqft, there was a huge gap. Prices can't go below construction cost," he added.

More buyers than good deals

In the last 2-3 months, Syed added, there are more serious buyers than good deals available in the market.

"Dubai is marketing itself excellent even in Covid-19 situation as high net worth individuals from India, Pakistan and Africa countries are more keen to move to Dubai as compared to EU nations just because Dubai handled the Covid-19 situation so well.

"I am very bullish on Dubai real estate market. Over the next 2-3 years, we will see the prices start moving upward and supply reducing in the couple of years," he added.