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New residential property supply in Dubai continues to decline, and the pipeline for the next five years also shows the number will drop considerably, especially in the villas and townhouses segment, say real estate consultants.
According to real estate consultancy Core, the residential units' supply is expected to reach 32,000 units by the end of 2020 as compared to initial estimate of 49,000 at the beginning of the year.
Dubai saw nearly 21,500 units come to market in the first nine months of 2020, bringing total residential stock to 571,500 units. Furthermore, there are over 10,500 units expected to be handed over in Q4 2020, making the total 2020 deliveries to 32,000 units.
"While there are other factors at play such as lower realisation rates over the past several years, we have seen the impact of Covid-19 cause a significant slowdown in handover volumes," said Prathyusha Gurrapu, head of research and advisory at Core.
"The government is implementing many demand drivers to spur recovery including the recent retirement visa regulations which is expected to create long-term demand as more resident expats and international buyers choose the UAE to settle down, thus contributing to sustained inward investment and population growth," she added.
"There are a few factors at the moment that will be affecting the supply in the real estate market but I would say that the higher committee of real estate certainly seems to be having an impact. If we take some information from Data Finder, we can see that from October 2017 to October 2020 there were 334 projects that were completed in Dubai," said Lewis Allsopp, CEO of Allsopp & Allsopp.
"By project, we're talking about individual towers or smaller villa communities, not 'master' developments. If we look ahead for the next five years, from October 2020 to October 2025, we can see that there are 176 projects scheduled for handover. So, the supply is reducing considerably," he added.
"We've been saying for a little while now that we can no longer talk about the Dubai property market as a whole and that we need to talk about different areas or segments to be able to give more detail and a fairer picture. What we're seeing at the moment is an undersupply in villa communities, which in some areas has led to up to a 10 per cent price increase in the last few months. Over the next 5 years, there will only be a total of 43 villa or townhouse communities handed over," he added.
"There is a slightly different picture on the apartment front with more projected handovers, but most are for projects that were launched before the higher committee for real estate came into being and we're still seeing considerably reduced numbers here," said Allsopp.
Core said with many districts transacting nearly 35 per cent lower than their 2014 peaks, sales prices remain at a cyclical low.
"As capital values now near the 2011 trough, we continue to see investor buyer interest remaining strong, particularly for competitively priced ready units. Historically, institutional investments have been limited in the UAE primarily due to the lack of investment-grade stock, despite strong demand. However, we now see institutional interest piquing as few existing developers and corporates are making assets available for disposition as occupiers look at focusing on core business lines and assets," Core said.
In Q3 2020, secondary market transaction volumes saw a 6.5 per cent increase compared to Q1 2020 due to the release of pent up demand built over a subdued Q2 2020. Interestingly, Q3 2020 transaction volumes were up by 10 per cent from Q3 last year.
"Despite the rise in secondary transaction volumes, sales prices continue to follow a downward trajectory with almost all areas showing sharp double-digit year-on-year drops. On the other hand, off-plan market activity is facing an interim lag in transaction volumes as buyers are increasingly preferring ready units to avoid further uncertainty and delays that may be expected from the off-plan market," said Gurrapu.
-waheedabbas@khaleejtimes.com
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