Why Dubai's Property Market Won't Face Oversupply in the Next 5 Years

The Dubai real estate market has always been a hot topic for investors, developers and analysts. With its big projects and fast growth, the emirate’s property sector has seen its ups and downs over the years. However, recent comments from industry experts suggest that Dubai’s property market will continue to grow, defying the fears of oversupply in the next 4-5 years.

A Bullish Outlook

Rizwan Sajan, founder and chairman of Danube Properties, is very positive about Dubai’s real estate future. In a recent interview, Sajan said the Dubai property market will not see an oversupply in the next 4-5 years even with all the projects that have been launched recently.

This bullish view is based on the following:

High Demand Absorption

Despite all the new properties coming into the market, Sajan believes high demand will absorb the new supply. The number of investors coming to Dubai has been increasing and many are making Dubai their second home.

Tourism Boom

The opening of gaming resorts in Ras Al Khaimah will have a big spillover effect on Dubai’s property market. Sajan expects this to bring in a massive number of tourists, potentially doubling the current numbers.

Short-Term Rental Opportunities

As the number of tourists increases, many property owners will list their properties on short-term rental platforms like Airbnb. This will create additional demand for properties and absorb any excess supply.

Limited Accommodation in Ras Al Khaimah

While the gaming resorts will be in Ras Al Khaimah, the emirate has limited accommodation options, so many visitors will choose to stay in Dubai, further driving demand for properties in the city.

The Supply Side

We need to acknowledge the massive supply that has come into the market in recent years. According to Cavendish Maxwell’s Property Monitor, developers in Dubai have been launching projects aggressively, and in Q1 2024 alone, more than one project was launched every day.

In March 2024, 30 off-plan projects were launched, adding around 10,000 units to the market. This rapid pace of development has raised concerns of oversupply. But Sajan argues that the demand will absorb all this new inventory.

Comparative Affordability

Despite the recent price increase in the last 3.5 years, Dubai is still an attractive market for investors compared to other global cities. Sajan says property prices in Dubai are still much lower than many major cities around the world.

Savills Research data:

• Dubai: $800 per sq.ft.
• Hong Kong: $4,000 per sq.ft.
• New York: $2,600 per sq.ft.
• London: $1,900 per sq.ft.
• Singapore: $1,800 per square foot
• Mumbai: $1,100 per square foot

This comparative affordability continues to make Dubai an appealing destination for international property investors, further supporting the argument against oversupply concerns.

Challenges and Considerations

While the overall outlook for Dubai’s property market appears positive, it’s important to note that challenges do exist, particularly for smaller developers. Sajan highlights that finding reliable contractors can be a significant hurdle for developers in the current market conditions.

Additionally, smaller developers may face difficulties in selling their units as quickly as larger, more established players in the market. This could potentially lead to localized pockets of oversupply in certain segments of the market.

Innovative Developments Driving Interest

Another reason for steady, further demand in the real estate market in Dubai is constant and new, innovative, and ambitious projects. Danube Properties, for example, recently unveiled Bayz 102 in Business Bay and Oasiz in Dubai Silicon Oasis. Bayz 102 features 40+ amenities and a helipad for air taxis. Such extraordinary developments are not only an exciting prospect for aspiring buyers but also set the seal on Dubai being the city of tomorrow.

This would most likely attract both local and international investors into new developments that bring the latest forms of amenities and technologies into the country, thus sustaining a healthy balance of supply and demand.

Looking Ahead

As Dubai continues to cement its position as a global business and tourism hub, the property market is expected to benefit from several upcoming developments:

1. Dubai 2040 Urban Master Plan: This comprehensive plan aims to enhance the city’s livability and sustainability, potentially increasing the appeal of various neighborhoods for long-term residents.

2. Economic Diversification: Ongoing efforts to diversify the UAE’s economy beyond oil are likely to create new job opportunities and attract a skilled workforce, further driving demand for housing.

3. Infrastructure Improvements: Continued investments in infrastructure improvement like Al Maktum airport expansion and public amenities are set to enhance the overall quality of life in Dubai. This will make Dubai an even more attractive place to live and invest.

Conclusion

While there is some justification for concern about oversupply in Dubai’s market given the pace of development, the next 4-5 years look good. Strong demand from tourism growth, affordability and new developments will absorb the new supply coming in.

But investors and developers need to stay alert and flexible to changing market conditions. Global economic trends, regional politics and changes in tourism patterns can all upset the supply demand balance.

Dubai will continue to change and adapt and so will the property market. If you are ready to invest in Dubai real estate, do your homework and have a long term view.

If you are a real estate investor who have the patience to stay long in investment, then these next 4-5 years in Dubai real estate can prove to be a golden period as High ROI and zero risk are guaranteed. Manuj Garg - CEO (Top Luxury Property)

So, what are you waiting for - Contact Top Luxury Property.

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