2016 Arrives: Were Dubai Property Supply Forecasts in 2015 Inaccurate?

Were Dubai Property Supply Forecasts in 2015 Inaccurate

In the year 2016, Dubai property developers are aiming to bring over 25,000 units in the market. However, just 31% will most likely materialize, or so says Reidin, Dubai’s property information service. And with good reason.

According to Reidin, developers were able to supply a little over 9,300 units in 2015 versus the projected 25,000 units. This has been in fact, a hot topic for argument between major Dubai developers and real estate firms over what the outlook for Dubai’s property supply will be in 2016.

There’s more to this tug of war: the dispute arose while a new law introduced by the Dubai Government puts a cap on private companies who wish to conduct surveys in the UAE. Dubai Property companies see this new data as complimentary to their outlook on property supply for 2016 while the developers are interpreting this as evidence that the property companies were wrong right from the start.

The ‘blame game’ began sometime in early 2015 when one property broker and researcher claimed that 25,000 units would be added to the real estate market throughout the year, even though government legislation coupled with a high US dollar were responsible for somewhat sluggish sales.

The managing director of a well-known property developer leveled accusations of malpractice at real estate agents, saying that they projected inaccurate property supply data. In his defense, one broker stated that many critics along with the major property developer misinterpreted his projections – developers had stated that they had plans to deliver supply ranging between 20,000 and 25,000 units in 2015 and that’s where the numbers came from: the developers themselves.

He further justified this by adding that when it comes to Dubai property supply, it is generally understood that realistically speaking, between 40-45% units actually get delivered based on the projected number (25,000 in this case). This is referred to as the “materialization rate”, that is, the number of units actually getting delivered in the market.

Keeping the above numbers in mind, the broker’s projection for units to be delivered realistically fall between 8,000 and 11,250; Reidin’s figure of 9,397, to be precise, lies within this range.

Irrespective of how accurate the early-2015 forecasts were, developers have “erred” on the side of caution by delivering a limited supply, as the Dubai property market continues to experience the cooling effect. Reidin has been quick to point out that house values may very well rise in 2016.

The Reidin report also stated that supply will continue to be limited as developers pay heed to declining prices by extending the deadline on existing projects. Fears of oversupply are not completely justified since a potent expansionary fiscal regulation will continue to aid in job creation.

Even though Dubai developers are firmly standing by the 25,000 figure with regard to property supply in 2016, Reidin points out that just 31% will actually materialize; that’s around 7,500 units, which is actually less than the new supply delivered in 2015.

The report concludes that as long as demand stays strong and outpaces supply, prices will start to rise again, quite an optimistic forecast it must be noted.

Looking to buy property in the highest ROI areas in Dubai? Consult our network of seasoned real estate agents to protect and manage your investment.


Leave a Reply

Your email address will not be published.

Captcha * Time limit is exhausted. Please reload the CAPTCHA.