Dubai: Dubai’s real estate market recorded a high-transaction volume during the last ten days of 2018 with a value of more than Dh 19 billion through 2,081 transactions.
Sultan Butti bin Mejren, Director General of DLD confirmed a healthy demand from buyers and investors who are benefitting from legislation and investment incentives recently announced by the Dubai government to make the emirate a preferred investment destination.
Dubai has a unique demographic mix that is rarely found in any other city in the world, as nine out of 10 of the registered 4.4 million Dubai residents are expats. About 1.22 million of whom reside outside Dubai and mostly live in neighbouring Sharjah, which leaves the city of Dubai with 3.18 million residents.
According to Haider Tuaima, head of real estate research at ValuStrat, Almost half of the workforce living in Dubai (46.9 per cent) earn less than Dh2,500 a month, these people cannot afford to rent their own home and therefore either live in various dedicated labour or staff accommodations or find a bed-space within shared rooms scattered within the city.
Another 18.2 per cent earn between Dh2,500 and Dh5,000, barely affording to rent a studio apartment, most of this segment live in shared rooms. The rest of the workforce (35 per cent) who earn monthly incomes anywhere between Dh5,000 and Dh35,000 (and above), with a median income of Dh12,000, has the financial capacity to rent (if not purchase) private homes located within most parts of Dubai.
The last five years saw the average net migration of almost 200,000 people a year, so about one million more residents since 2013 now reside in Dubai. For the last five years, the population grew 7.6 per cent on average each year. Assuming that 30 per cent of the current Dubai population of 3.18 million residing in labour or staff accommodations, the housing demand for 2018 is estimated at 557,000 residential units.
Official Dubai housing supply data for 2017 points to a total of 432,278 apartments and 96,222 villas, or 528,500 residential units. This is not counting villa attachments, Arabic houses, labour accommodation rooms, collective households, and others.
At the start of 2018, ValuStrat reported that 45,000 housing units would be completed by the end of the year, however, as with previous years, not all projects were completed as scheduled, therefore only an estimated 21,417 units, or 43 per cent of the original estimate was completed, 17,766 apartments and 3,651 villas, making the estimated total residential supply as of the end of 2018 at 549,917 units. So, if we use the estimated demand number above, Dubai would have a shortage of 7,083 homes.
But what about the next few years? Tuaima says that because of project delay backlogs from the last three years, next year is estimated to add no less than 78,000 units, this figure is based on completion dates announced by the developers, contractors, etc. If we assume that 40 per cent of projects are to be completed without delay, we can then expect 31,200 units for 2019, which should cover the shortage from 2018, and add another 24,117 homes, which may not be enough for the next 200,000 Dubai residents.
It’s interesting that historically, housing costs in Sharjah and the rest of the northern emirates are more affordable than neighbouring Dubai, as new supply puts downward pressure on Dubai rents causing it to fall 20 per cent when compared to the last two years. It would come to no surprise that if just 5 per cent of Sharjah’s residents, who commute to Dubai daily, decide to avoid the traffic congestion and move to Dubai, we would estimate a housing supply shortage of 23,000 units this year alone.
Given the median income and the high percentage of the lower wage workforce in Dubai, further housing shortage becomes apparent, stemming from the fact that supply doesn’t necessarily match the demand for affordable housing. Fortunately, both government as well as private developers have recognised this gap in the market, where we find that much of the upcoming supply targets mid-income households, however, more needs to be done to cater to the affordable segment.
Source : Gulfnews