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‘Fear not Dubai real estate market oversupply’: Expert

There are fears Dubai's real estate sector may be oversupplied and looking at property stocks seems to reflect that. There is little to fear, as demand is looking robust.

Oversupply is casting a cloud over Dubai developers and real-estate companies at the same time that the region confronts a slump in oil prices Expo looming, population will increase as these sectors continue to expand, creating job opportunities for many expats Some supply will be taken by investors who have been enticed by the attractive offers, payment plans, and visas provided

Dubai stocks are giving investors an update on the woes confronting the local real-estate industry, says Bloomberg.

The DFM Real Estate & Construction Index fell about 7 % last week, the biggest weekly drop since May 2016. All but one of its members were down by at least 2 %, compared with an overall 0.1 % retreat in an emerging-market gauge for the sector, it reported.

Oversupply is casting a cloud over Dubai developers and real-estate companies at the same time that the region confronts a slump in oil prices. Emaar Properties PJSC, the sheikhdom’s biggest developer and the stock with the third-largest weighting in the local benchmark index, last month put on hold plans to sell new debt as interest rates increased. 

Shares of subsidiary Emaar Development PJSC had the worst week since its 2017 market debut.

About 31,500 homes will probably be completed in 2019, more than twice the city’s average annual demand over the last five years, according to Craig Plumb, head of Middle East research at broker Jones Lang LaSalle. That compares with the 22,000 homes finished in 2018.

Dubai’s residential values have slid about 25 % from the 2014 peak, including a 10 % drop last year. JLL expects values to decline by 5 % to 10 % this year.

With the launch of new developments and talk of oversupply in the Dubai property market, Lewis Allsopp, CEO of Allsopp & Allsopp has released quotes with a differing view.

“The UAE economy is set to see significant growth. This growth is predicted to be seen in the transport, communications, construction and real estate sectors. With Expo looming, population will increase as these sectors continue to expand, creating job opportunities for many expats.

“The real estate sector has often been referred to as being oversupplied, however, the population has increased by 6.2% since 2017 and is predicted to continue on this increasing trend. More and more people are being encouraged to move to the city with the job opportunities opening up and the UAE cabinets introduction of Investor visas, 10-year residency visas, 100% company ownership and retirement visas. Some large developers such as Emaar are offering a free trade license with a purchase of a property above the value of AED1 million.”

“The investor and expat encouragement provided by the Dubai Government and certain developers will have an impact on the property market to a certain degree. Some supply will be taken by investors who have been enticed by the attractive offers, payment plans, and visas provided, however, we still believe that encouragement must be given to people who already reside in the city. Residents in Dubai who are looking to step onto the Dubai property ladder are finding it difficult to find the high deposits to put down on a home. To inject more demand and higher transaction levels in the real estate market, we would recommend a helping hand for first time buyers.”