31/01/2015 21:07 AST
Following a period of stabilisation, the Dubai housing market could experience a supply shortfall in 2020 as the World Expo, a six-month long extravaganza, approaches, said an expert.
Dubai may need more low-end and ultra-luxury properties to cope with housing demand in the next five years, remarked Jesse Downs, the managing director of Phidar Advisory while speaking at the Destination Dubai 2020 conference held recently.
"For example, the most undersupplied segment, in total units, is housing for the income group with an equivalent monthly housing spend of Dh3,000 to Dh5,500 ($817 to $1497), based on a 30-35 per cent housing spend," said Downs.
According to her, there could be property investment opportunities at the lower end and the very pinnacle of the market.
"There is a shortfall and it is considerable. We see an additional undersupply by 2020. There are opportunities, but where are the opportunities? I think we are overbuilding for the mid- and high-income sector," stated Downs.
“We need more mid-low and low income, and genuine luxury, as well,” she added.
In the fourth quarter of 2014, the nominal apartment sale prices fell 3.3 per cent compared to the third quarter; nominal single family home (SFH) sale prices fell 0.9 per cent quarter-on-quarter. The average apartment net yields increased to 6.7 per cent in the Q4 compared to 6.5 per cent the previous quarter.
Global real estate consultancy Jones Lang Lasalle said a total of 25,000 housing units will be added to the Dubai market this year and this may sate demand for a short period.
However, majority of the experts at the Destination Dubai 2020 summit believed the emirate would need a significant number of new developments to receive the 25 million tourists during the expo.
The expo will run for a period of six months, commencing October 20 and will extend into April 2021.
The economic activity associated with the expo is expected to generate around 270,000 new jobs.
Franck Delage, the real estate analyst (Europe, Middle East and Africa) at ratings agency S&P, said the property market in Dubai was more equipped for long-term stable growth than it had been in the past with more regulations in place to help reduce the risks.
He pointed out that the ratings agency has given all of Dubai’s real estate corporates a stable outlook and he doesn’t expect this rating to change over the next 12 months.
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