With demand for property stabilising over the past year, Dubai’s real estate market has faced increasing concerns of oversupply as competition among developers continues to grow, according to a UAE-based developer.
With more companies entering the market over the past few years, the sector has faced declines throughout 2017, forcing developers to drop prices among slowing sales.
Bshir Osman, head of engineering at Gulf General Investment Company (GGICO), told Construction Week: “I believe that the market is oversupplied for the time being and that this point must be controlled.”
According to Osman, developers have been forced to drop prices because of the large number of new companies entering the market over the past few years.
Osman does not believe, however, that the market is in decline, explaining: “I don’t believe it is declining, but what we are seeing is more of a correction. As we get closer to Expo 2020, things will be more stable.”
According to JLL’s Q3 2017 Dubai Real Estate Market Overview report, the majority of completions during the third quarter were apartments, with a further 3,300 units expected to be delivered so far.
The data also suggests that up to 80,000 units could be delivered before the end of 2019 as construction activity intensifies in the lead up to Expo 2020, though actual deliveries are likely to be below this level.
The report echoes sentiments held by Osman, highlighting the evidence that sales prices for villas and apartments have remained largely stable over the last quarter, with a suggested increase in the number of vacant apartments in the city, including in prime locations such as Downtown Dubai and Marina.
As a result, tenants have been able to renegotiate their rents downwards by an average of 5% to 7%, the JLL report reveals.
A recent report by real estate consultancy Cluttons also underlined these figures, showing that residential prices continued to slip in 2017, dropping by 1.9% in the three months to the end of September.
This followed on from the 1.5% drop in the second quarter of the year with an annual rate of change at the end of Q3 standing at -5.6%.
Osman believes that these constraints will carry over into 2018, adding: “We will still face similar challenges in the coming year, including oversupply, but I am also expecting increased regulation in the market.
“I see more investors entering the market in the next couple of years, especially from 2018 onwards as more people start buying properties to sell in 2020.”
The senior official expressed belief that Dubai’s Real Estate Regulatory Agency (RERA) will counter these concerns in the coming year by setting further regulations to maintain the challenges faced by the growing competition in the market.
“I heard that new regulations will be put into place next year,” Osman said. In this regard, the Dubai government recently announced new residential legislation in Dubai that is likely to have an effect on the emirate’s property market, according to the Cluttons report.
These policies are likely to impact market through the planned provision of affordable homes in some of the city’s core locations.