Dubai's population boom, paired with an influx of European property investors, is driving a housing shortage and a rise in rents, real estate experts have said.
The city’s popularity has led to new properties selling out almost immediately, while soaring costs mean many current tenants and owners are reluctant to move as they believe they would have to pay significantly more elsewhere.
These factors have led to a shortfall in available property in the market, with demand exceeding supply, leading real estate figures told The National.
“There is a pressing need for more property developments with quicker handover times to address the housing shortage in Dubai,” said Lewis Allsopp, chief executive of real estate company Allsopp & Allsopp.
“With a high population and limited housing options, finding a home in Dubai is becoming increasingly challenging for both tenants and buyers.
“Therefore, unless there is a significant increase in the speed and frequency of property construction and handovers, the shortage of available properties in the city is expected to persist for the foreseeable future.”
It often takes two to three years for properties to become available for handover, he said.
“It is crucial for developers to keep launching new communities and developments to meet the high demand for housing in Dubai,” he said.
“This is particularly important when considering the city's 2040 population goal of 6.5 million residents.”
Overseas investment boosts market
The property market in Dubai is in good health with prices increasing by an average of 11.5 per cent annually in February.
A large part of the reason for the property shortage is that new investors are snapping up homes as soon as they become available.
It was notable that one market in particular was increasing its presence on the Dubai property scene, said Mr Allsopp.
“In the past month, 25 per cent of our buyers were British while 8 per cent were Russian and 7 per cent were Indian,” he said.
“Although we have observed a steady stream of European buyers in the market, it is notable that Russians have recently gained a significant market share for the first time.”
The number of villas and apartments supplied in the last three months in Dubai was 8,920, while over the past six months, that number stood at 17,530, according to data from the emirate’s land department.
Data from Dubai Statistics Centre's live population counter also said Dubai's population crossed 3.5 million in April 2022 and has grown by another 69,000 since.
If numbers continue to grow at this current rate, by the end of the year there will be about 70,000 new residents, said another leading expert on property in the emirate.
“Even when considering two people per unit, there will not be enough supply to keep up with new demand,” said Charlie Bannan, sales director with Haus and Haus.
Rising rental prices have led to many residents choosing not to move, due to the fact they would have to pay significantly more than their current rent for a similar property elsewhere.
This has had an adverse impact on the number of vacant properties available on the market, said Mr Bannan.
“Couple this with the steps it takes to serve notice to a tenant and the supply for the motivated end user looking to purchase, means there’s a supply and demand gap in favour of the seller.”
People need to widen the search
Part of the issue is that house-hunters are looking for properties in the same areas, said one of the emirate’s leading developers.
“People want to move to areas such as Barsha Heights, Al Furjan, Jumeirah Village Circle (JVC), the Springs and Jumeirah Village Triangle (JVT), where there is a lot of construction and the inventory is low,” said Madhav Dhar, co-founder and chief operations officer at ZaZEN Properties.
“They want to live in these areas instead of in old Dubai which is Bur Dubai and Deira.
“There is property available. You can still go to areas which are not as popular as others and find places available.”
Some of the other areas he advised people to check out for properties included Sports City and International City.
“It’s going to be a little more difficult because there are a lot of businesses moving to the likes of Media City, Tecom and Jafza,” said Mr Dhar.
“People are going to want to stay in that catchment area and a lot of it depends on where you work.”
One of the most notable developments in Dubai’s property landscape in recent years has been the development of areas on the outskirts of the city, something he predicted would continue.
“If you go down Umm Sequim Street, and further out the Al Qudra Road, you will see a lot of popular new areas,” he said.
“We are going to see them continue to develop as the roads and infrastructure grow there.
“That’s going to help with people looking for more options to move to but there is a trade-off in that you have to consider if you are happy with a 30-minute one-way commute to work each day.”