Some Dubai areas see shortage of smaller apartments

Some areas in Dubai are witnessing a shortage of smaller units due to massive demand due to an increase in the population and insufficient supply of fresh units in those areas.

Real estate industry executives say that Old Dubai areas such as Bur Dubai and Deira are facing a shortage because not many new projects have come up due to the lack of availability of development areas in those localities, failing to keep up with the demand amidst the fast-growing population in the emirate.

Dubai's population grew more than 100,000 last year and by over 176,000 in the past two years, mainly driven by the inflow of foreign expatriate workers, professionals and investors into the emirate. Meanwhile, the number of new units delivered in the past couple of years is much less than the growth of the population, resulting in a shortage of smaller units to rent.

Real estate consultancy Asteco's quarterly showed affordable and old Dubai areas also witnessing a double-digit increase in apartment rentals in the third quarter of 2023, increasing by up to 23 per cent when compared to the same quarter last year.

In addition, New Dubai areas offer the advantage of owning properties in freehold areas, prompting higher demand for new units and enticing developers to launch more projects in the new and upcoming areas.

Industry executives say there is enough supply in the New Dubai areas for smaller units to meet the population's growing demand, which is estimated to reach nearly 6 million by 2040.

Focus on high-end developments

"Old Dubai faces a shortage of smaller units, featuring larger and more spacious apartments constructed 20 to 35 years ago. During that period, Dubai's population was significantly smaller, mainly comprising families with several children. Consequently, private owners developed notably spacious apartments with multiple rooms to meet the demands of the residents and citizens. For instance, the majority of two-bedroom units include an extra room for a helper, along with spacious laundry and storage rooms, not to mention en-suite bathrooms for each room," said Svetlana Vasilieva, sales director for secondary market at Metropolitan Homes.

Alan James Gammon, chief operating officer of ACE Luxury Property, said there are several reasons for this scarcity, including population growth, increased demand for small living areas and a focus on building high-end real estate developments rather than affordable housing options.

Gammon added that the demand for old established communities in Dubai remains high, particularly in Bur Dubai and Deira, where limited capacity for new construction exists.

"While Old Dubai's cultural richness adds to its appeal, the scarcity of space hinders the availability of smaller homes and additional services. Therefore, many new residents in old areas have to live in sublet and shared apartments."

Gammon added that New Dubai, characterised by its contemporary residential and retail projects, expansive land area, and luxurious residences, offers a greater supply of studios and one-bedroom units. "The allure of a modern lifestyle, coupled with state-of-the-art infrastructure and amenities, attracts residents to New Dubai, potentially leading to shortages in these sought-after areas. But the New Dubai lifestyle comes with a bit higher price tag."

Over the last few years, as Dubai's property market continued booming, Lewis Allsopp, chairman of Allsopp & Allsopp, said the market also saw a rise in luxury, ultra-luxury, and branded residences. Since then, the market has also seen a limited availability of affordable housing and smaller units.

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