A wave of project launches is expected from Dubai’s major developers looking to complete schemes before 2020, even as a glut of new homes keeps a lid on rents, according to CBRE.
The firm’s UAE head of research and consultancy, Matthew Green, said that “Expo will start to have more and more of an impact” on Dubai’s residential market as the date draws closer.
“I think 2017 could be the height of that because developers know that they really have to be getting spades in the ground now if they are to stand a chance of delivering in time for 2020.”
Speaking at a media event to launch its Dubai Annual Market Update, Mr Green said that CBRE’s consulting arm is expecting an increase in requests for feasibility and “best-use” studies from developers currently looking to bring projects forward.
“Many of Dubai’s major developers [are] all seeing this as the kind of golden opportunity – the best opportunity to be able to sell since 2006-07,” he said.
This eagerness to get projects under way is taking place despite a considerable number of units already in the pipeline. CBRE said that 70,000 units are currently projected by developers to be delivered between 2017-19, but this figure could increase as new schemes emerge.
The 10-year average for homes delivered in Dubai stands at 21,000 per year, but if the effect of the boom years of 2007-08 is filtered out, yearly average completions stand at about 15,000 units.
Mr Green said that increased supply “could cause some deflationary trends and in 2017 we expect to see rental rates decline further”. The firm said rents dropped by 4 per cent on average last year, and Mr Green expects rents to fall across the board by about 5 per cent this year. Residential prices, which have been flat for the past two quarters, are expected to remain so in the short run.
CBRE does not expect an increased supply to lead to another crash. Managing director Nicholas Maclean said that “the market has learnt some lessons from 2008-09”, with developers more willing to phase handovers to match demand, citing Dubai Holding’s Jumeirah Central and Emaar Properties’ Dubai Creek Harbour as examples of projects planned over 25-30 years.
“If these projects were historically launched in 2007-08, everything is coming to the table at the same time,” said Mr Maclean.
He argued that increased housing stock can be absorbed so long as Dubai’s economy continues to grow, and more employment opportunities are created.
”We don’t want this market to be dominated by speculators,” said Mr Maclean. “Speculators are important, but we can’t have them being the proportion of the market that was the situation in 2007.”
Earlier this week, consultancy Valustrat said in its fourth-quarter report that its price index experienced a 0.5 per cent year-on-year decline in value, but that residential prices have “been broadly stable for 18 months”.
mfahy@thenational.ae
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