Dubai residential units supply unlikely to meet rising demand this year

The Dubai residential market is expected to see lower deliveries this year despite strong demand as rising construction costs and supply chain issues are impacting project delivery timelines and further increasing sales price, says a report.

The apartments and villas are expected to face shortage of at least 15 per cent residential units as developers will be able to deliver only 32,500 units compared to an estimated 38,000 planned this year. About 5,700 residential units were delivered in Dubai during the third quarter, totalling to 19,000 units delivered in 2022 is far while another 13,500 units are expected to be delivered in fourth quarter, according to the latest Core's Dubai Market Update report.

"This is a first downward revision that we have witnessed in our yearly forecasts since 2016. However, many developers are accelerating their completion timelines and aiming to handover projects sooner than anticipated due to positive market conditions," Prathyusha Gurrapu, head of Research and Advisory at Core, told Khaleej Times.

Apartments deliveries dominate

The Core's report pointed out that most deliveries continue to be in the apartment segment with only 22 per cent of year-to-date deliveries being villas.

"Villas in master developments offering a variety of amenities and a sense of strong community remain the main focus for residents, creating a supply deficit and continuing the upward pressure in villa rents and sales prices," the report said.

Where the most units delivered

The highest number of handovers were witnessed in Mohammed Bin Rashid (MBR) City, Dubailand, Business Bay, Downtown Dubai and Jumeirah Village Circle. Major deliveries included The Grand at Dubai Creek Harbour, Avencia and Aquilegia in Damac Hills 2, One Park Avenue in Sobha Hartland, Golf Grove in Dubai Hills Estate and Le Pont in Port de La Mer.

“Over fourth quarter of 2022, we foresee MBR City — which includes, Dubai Hills, District One, Sobha Hartland and Azizi Riveria — to lead supply delivery, accounting for nearly 54 per cent of all expected handovers, followed by Dubailand, Jumeirah Village Circle, World Islands and Jumeirah Village Triangle, according to the report.

Project delays

Haider Tuaima, director and head of Real Estate Research at ValuStrat, said residential supply is expected to see a downward revision as some projects may face delays in completion this year.

“Our records show that 16,000 apartments and 3,500 villas were completed during the first nine months of this year. This represents 41 per cent of the total completions anticipated for this year,” Tuaima told Khaleej Times recently.

“Based on developer completion schedules, the total number of homes to be handed over in 2022 to be just under 48,000 homes. Realistically, its highly likely that some projects may witness delays of up to 18 months, therefore the estimated total maybe adjusted downwards once the year has ended,” he said.

In reply to a question about the supply of residential units is good enough to cater to the rising Dubai population, he said the Dubai residential market continues to suffer from an oversupply of apartments within the E311 and E611 corridors, this situation is expected to remain in the medium term.

“We do believe that there are pockets of undersupplied homes, particularly for the prime-located high-end submarket. This is why, we see homes located in Palm Jumeirah, Emirates Hills, Dubai Hills, Jumeirah Bay, Blue Waters Island, and City Walk continue to enjoy capital appreciation,” he said.

Rising population

Imran Farooq, chief executive of Samana Developers, also acknowledged that supply of residential units is less than extra ordinary demand of the Dubai properties this year.

“To cope with the demand, Dubai needs more inventory to accommodate new people and their families to Dubai,” Farooq told Khaleej Times.

“Supply needs to catch up to rising population and keep the supply and demand on sustainable level. Right now, the supply is enough but it must add more inventory for upcoming season, returning residents and new people from all over the world,” he said.

Ata Shobeiry, chief executive of Zoom Property, said the higher interest of investors and buyers has resulted in a higher supply of apartments and villas. He said several developments are still underway, which will lead to a further increase in the supply.

muzaffarrizvi@khaleejtimes.com