Dubai expects supply of 50,000 new property units in 2020

Sale price declines in the emirate are likely to ease in 2020, particularly for newly launched projects, according to Asteco

A total of 31,000 residential units were handed over in Dubai in 2019, according to Asteco. Sarah Dea / The National

Dubai is expected to see a fresh supply of 50,000 residential units and 2.5 million square foot of office space in 2020, similar to supply dynamics of previous years in the emirate, according to property consultancy Asteco.

Sale price declines are likely to ease this year, particularly for newly launched projects, as development costs are approaching the lowest practical level, Asteco said in its latest report. Prices in the secondary market, on the other hand, are expected to record additional drops in 2020, it said.

“We will continue to see project launches from master developers with construction-linked and post-completion payment plans," the report noted. "Calls from industry leaders or experts for a short-term curb on new projects in order to restore the supply-demand balance are expected to increase.”

Dubai's real estate market has slowed after a drop in oil prices that began in 2014, and has been further pressured by an oversupply of properties. Residential real estate prices dropped by almost 6 per cent last year, according to data from consultancy Reidin.

The emirate - the commercial and trading hub of the Middle East - in September formed a new higher committee for real estate to tackle supply issues in the market.

The committee set up on the directives of Sheikh Mohammed Bin Rashid, Vice President and Ruler of Dubai is working towards a better supply balance in the emirate's real estate market through greater collaboration between government-related entities and private-sector companies.

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Inside the Dh45m Cayan Tower penthouse

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Expo 2020 is also anticipated to improve overall market sentiment, particularly with the flow of a significant number of short-term visitors.

"The lead-up to and execution of the exhibition has and will continue to showcase the UAE and help project the national brand onto the global stage," John Stevens, managing director of asset management at Asteco, said.

A total of 31,000 residential units were handed over in Dubai last year, comprising approximately 23,600 apartments and 7,400 villas, with communities such as Damac Hills, Dubai Hills Estates and Akoya Oxygen accounting for the bulk of completions. The commercial sector received 3.1 million square feet of new office space, according to the Asteco report.

New supply entering the market is expected to continue putting pressure on rental rates this year in Dubai. Apartments, villas and offices recorded average rental declines of 11, 10 and 12 per cent rental declines in 2019, respectively. Sales prices of apartment, villa and office were down by an average of 13 per cent to 15 per cent last year.

“Increased affordability opened the market to a wider investor pool and facilitated a rise in end-users and first-time buyers,” the report found.

In Abu Dhabi, approximately 10,500 residential units are expected to come to the market in 2020. The majority of the upcoming supply is expected to be in Reem Island  (1,850 units), Al Raha Beach (3,800 units), Yas Island (1,300 units) and  Saadiyat Island (240 units). The emirate last year saw deliveries of 6,500 residential units, comprising 5,200 apartments and 1,400 villas.

Rental rates are expected to slide in Abu Dhabi this year for all asset classes as landlords look to offer discounts, incentives and flexible payment terms in the capital, according to the report.

Apartments and villas in the emirate recorded average annual rental declines of 7 per cent and 4 per cent, last year.

Although sales prices could further decline in the emirate, the proposed rent-to-own scheme available for a selection of Aldar projects is expected to boost interest.

Average apartment sales prices in Abu Dhabi decreased 8 per cent in 2019. The decline in villa sales prices was less pronounced at approximately 4 per cent, the report said.

The year ahead looks to build on the wide-ranging stimulus packages, budgets and reforms announced in 2018 and 2019, including Abu Dhabi’s Dh50 billion Ghadan 21, improvements to property laws and visa regulations, as well as Dubai’s largest-ever annual budget worth Dh66.4bn for 2020, Mr Stevens said.

“The initiatives seek to boost the economy as a whole and support the much anticipated launch of Expo 2020,” he said.