In total, the value of projects either planned or under way in Dubai will hit $310 billion over the next decade.
Demand for residential units 'to outstrip supply'

By Robert Ditcham, Staff Reporter
Published: August 06, 2007

Dubai: Demand for residential units in Dubai is expected to outstrip supply until at least the turn of the decade, making chances of a price correction appear slim, according to a new report.

Supply of residential properties will total approximately 175,000 new units by 2010. But an estimated 181,000 units will be required by the end of the decade - an undersupply of 6,000 units, according to the MEED Dubai Real Estate Report 2007.

In total, the value of projects either planned or under way in Dubai will hit $310 billion over the next decade.

Of this, close to $230 billion, equivalent to almost three-quarters of the total, is planned in the property sector, the report stated.

Angus Hindley, research editor at MEED, said the report shows that the property industry will prevail as the main factor fuelling Dubai's booming economy until at least 2010.

"Real estate has played and will continue to play a vital role in Dubai's growth. It is a lynchpin for the emirate's economy, fuelling the construction boom and attracting billions of dollars to Dubai," he said.

Uppward momentum

The other main findings show that construction has grown at an average of 32.7 per cent a year since 2001 and in 2006 accounted for 12.7 per cent of total GDP, up from 7.2 per cent in 2001.

Averaging at 17.9 per cent since 2001, the economy of Dubai has been one of the best performing in the Gulf over the past five years, largely due to property development.

Real estate and business services have recorded average growth of 25 per cent a year, driven in large part by government-empowered developers, such as Emaar Properties, Dubai Properties and Nakheel, and landmark projects like Downtown Dubai, Business Bay and the Palm Islands trilogy, said Hindley.

Numerous real estate analysts contacted by Gulf News agreed that a major price correction in the residential sales market before the turn of the decade looks unlikely.

Many said they expect the market to maintain its upward momentum, but returns on investment to shrink slightly as increased supply puts pressure on sellers to set "more realistic" prices, especially in the mid-market residential sector.

Forecast

"There is still plenty of life left in the market - plenty of room for investors to make some good profits, although maybe not the kind of profits that were made two or three years ago," said Craig Johnson, general manager of Dubai-based Landmark Properties.

A correction will be more likely to occur in the rental market, analysts say.

Second quarter 2007 figures provided by UAE real estate services company Asteco showed that rental rates for apartments in Dubai increased just two per cent on average, compared to 12 per cent for villas.

In the commercial sector, Asteco said office rents should remain high through 2007 and 2008 due to delays in bringing supply onto the market.

2009 could be the turning point for rents, said Asteco's managing director Andrew Chambers.

Some 50 million square feet of commercial space will be available in Dubai by 2010, 28.5 per cent of which will be in Business Bay, according to Asteco's report.