Across Abu Dhabi and Dubai, the residential market is facing an oversupply of units and UAE-based architects advise developers to diversify their products in order to maintain buyer interest.
According to a report released by Jones Lang LaSalle, the value of residential properties in the UAE declined by 25 percent since its peak in 2014, and a further five to 10 percent decline in property value is expected in 2019 due to the supply of homes currently exceeding demand.
Prime residential prices have also declined, stated the report, which fell by 11 percent in 2018. Despite the residential market slump, though, the residential sector life-cycle and upcoming Expo 2020 are indicators that property prices may experience an upswing in the mid to long-term.
“Large residential developments, where hundreds of villas are sold off-plan are definitely slowing down,” said Lee Nellis, managing partner at the Dubai-based XBD Collective. “Clients realise they can buy plots and build something suited to their needs at cheaper costs than buying off-plan homes. However, the biggest problem is the oversupply of apartments, and this has put a lot of pressure on developments under construction, as developers may not be able to sell their apartments at the calculated rate.”
According to Martin Dufresne, design principal at U+A, the country’s residential market is currently sales driven, meaning sales teams within the developer companies are actually driving the architectural typologies of the residential products and what they need to offer.
“Challenges are within their organisations in terms of trying to find new ideas with the help of us as architects to come up with the typologies,” Dufresne added. “It’s an aggressive market, but developers are trying to present attractive new products.”
Dufresne further noted that these new typologies reflect new lifestyles that developers are focsuing on to
attract a different category of investors and buyers.
“We’re working on a number of very efficient and downsized residential developments,” he said. “Townhouses, rather than villas, are the way to go at the moment. They’re quite cost-effective for both construction as well as for investors. At the same time, they offer a product for individual families that satisfies an individual dwelling kind of category without being on a large piece of land which might cost a lot of money. So it seems like a good middle ground.”
Nellis agreed, noting that more affordable housing is necessary in the country. According to him, “the majority of the UAE’s population are unable to afford the luxury apartments and villas that [populate] the current market. Family homes that cater to the blue and white collar workers, not just the wealthy, need to be developed. Many expats are unable to buy a home, even though they have lived here for many years.”
While developers are currently looking at ways to offer what Dufresne called “highly efficient, smaller sized units” to compensate for the oversaturated luxury residential offering, many architects are also expecting the market to witness an upturn following Expo 2020.
“The UAE is building for the future,” said Nellis. “Perhaps we see the current market as slow, but with Expo 2020 next year, it has the potential to turn around quickly.”
Dufresne added, “Developers will need to come up with new typologies because it seems that this is, in terms of the sales-driven market, just like coming up with a new product to sell in a supermarket….And these new developments will be very much lifestyle-driven. That’s quite the centre line and the backbone to all these new products coming out.
“What’s really exciting though is that the developers are actually willing to push the limits of the standard ways of living in Dubai. It’s not just about having a different typology. It’s also about having a different inhabitant and way that they live and interact with their neighbours. That’s going to attract living investments, meaning people will come here and be more attracted to live here because the city offers their lifestyle. It could have an interesting impact on the population in Dubai.”