Dubai housing to get supply boost

Developers Race to Complete Projects Ahead of Expo 2020

Residents will be able to buy or rent on more flexible terms as a record 41,000 homes are expected to come onto the market this year, thanks to a higher completion rate ahead of Expo 2020.

The latest data from Property Finder Group shows that up-and-coming communities are likely to see the most completions this year, while established neighbourhoods will see only a few additions. According to the portal, 30% of the 41,000 homes under construction this year are 96–99% complete, and Jumeirah Village Circle is expected to deliver the most, with 3,400 homes.

Lynnette Abad, director of Research and Data at Property Finder, said it is an excellent time to buy. "Considering more than 70 per cent of expats rent, this new supply is very much welcomed as residents are benefiting by upgrading the community in which they reside. As the Dubai property market matures, residents are finally seeing rents reduced to a level that is considered affordable and, in turn, their cost of living is going down," she added.

Investors Help Projects Reach Completion

Shaher Mousli, chairman and CEO of Arthur Mackenzy Properties Group, said 2018 was a slower year than 2017 and 2016, which caused some projects to slow down. Last year, however, an influx of investors put money into these projects, which owners and landlords offered at good prices.

"Usually, opportunities arise for investors when there is a slowdown in the market. During a crunch time Dubai has always presented lucrative opportunities to external investors which enables project completion," he said. "I believe that a main reason for many projects heading towards completion now is to meet the expected demand during Expo 2020," Mousli told Khaleej Times.

More than 28,000 homes were handed over in Dubai in 2018, more than in any of the previous few years, according to Property Finder.

"I believe Dubai's real estate market has been extremely resilient in a cloudy weather and continues to remain one of the highest yielding internationally. There are several projects anticipated to complete this year, which in turn will offer the consumer a wider choice in location, price and quality," said Atif Rahman, director and partner of Danube Properties.

He said the new deliveries will bring some pressure, but it should not be a cause for worry. As has happened historically in every global market, it will even out over time as population growth increases demand. "I expect the demand to catch up from Q3, which shall create the upward momentum for sale price and rentals. It's a great time for end users and investors to take advantage and be ready to reap the results," he said.

A Higher Completion Rate

Although more than 41,000 homes are scheduled for completion in 2019, there is usually a considerable gap between what is announced and what reaches the market. Actual deliveries have been 30–50% lower than developer projections, because developers usually adjust supply to match demand, the report said.

Citing JLL, Abad said the materialisation rate has traditionally been 40–50%. "Supply hit a peak in 2018, however that doesn't mean the materialisation rate changed due to the number of projects under construction and new project launches," she said.

As of February 2019, the stage of completion of the 41,000 homes due this year was as follows, which may lead to a higher materialisation rate this year:

"One of the key reasons behind higher materialisation rate of projects is partly due to the Expo 2020 factor, as most of the projects were planned to support the growth, which is expected from the Expo," Rahman said. He credited the strong regulatory environment for healthy project delivery and high investor confidence. "The support and control from the regulators has made every Property developers more responsible towards their obligations to complete projects on time."

Prathyusha Gurrapu, head of Research and Advisory at Core, said in the firm's latest report that most deliveries are in the affordable to mid-market segment, with Dubailand and Jumeirah Village Circle and Triangle accounting for a third of all handovers. "Although the pace of price softening has relatively slowed, we expect a lag in sales and rental price recovery as existing vacant stock and future supply over the next couple of years is expected to outpace steady demand," Gurrapu said, adding that many of these developments were planned during the 2014–15 peak.

"We also foresee developers aligning deliveries in the run up to Expo 2020. We have seen handovers increase over the last year, with over 21,700 units delivered in 2018 and expect a higher number of deliveries over 2019 and 2020, despite taking into account conservative realisation rates," Gurrapu said.

A Good Start to the Year

According to Property Finder, 4,441 homes were completed in Dubai in the first two months of 2019: 4,184 apartments and 257 villas and townhouses. The communities expected to deliver the most homes this year are:

"In the areas where new supply will be released, sales and rental prices will continue to adjust based on market demand," Abad said. "Over the last year, this has given opportunity to a new market trend where we have seen a significant amount of renters converting into home owners and we believe 2019 will be the year for end-users.

"For those continuing to rent, we will continue to see the trend where many will upgrade to bigger units or move to more desirable areas with sought after amenities in addition to retaining negotiating power. Both of these trends have increased the amount of disposable income which contributes to the overall economy," she explained.

New developments such as Mohammed Bin Rashid City, Al Furjan and Town Square will each add more than 2,000 homes this year, while Akoya Oxygen, Mirdif Hills, Dubai South and Damac Hills will each add more than 1,000. Established communities will contribute only a small share of 2019 supply, including International City (512), Palm Jumeirah (289), Dubai Motor City (276), Dubailand (188) and Jumeirah Golf Estates (95). Bucking the trend are Downtown Dubai (1,772) and Dubai Marina (944), where significant construction is still under way.

Asked how much of the 41,000 homes will be affordable, Abad said: "If we look at the areas where majority of the supply will be completed, we can expect to see affordable stock in quite a few areas including JVC, Sports City, DSO, Dubailand, Arjan and Dubai South which account for about 33 per cent of the 41,000 to be completed."