Dubai Braces for Looming Housing Supply Crunch Amidst Surging Demand & Population Growth
Excelsior Real Estate
Specialising in the sale of off plan, developer direct and luxury homes
Dubai's residential property market could face a continued major supply-demand imbalance in the coming years as unprecedented population growth is projected to rapidly outpace new housing development.
?According to forecasts by real estate consultancy Knight Frank, Dubai's current 3.5 million population could reach 6 million by 2033 based on the Dubai Economic Agenda D33's goal of doubling GDP by then. Looking further ahead, the Dubai Urban Master Plan 2040 aims to grow the population to 7.8 million.
?To accommodate these growth targets, Dubai's existing housing stock would need to practically double. However, current and planned supply may fall severely short.
?Early indicators of undersupply are already manifesting. In Q1 2023, Dubai's GDP grew 2.8% driven by thriving sectors like retail, aviation and hospitality. The emirate boasted a world-leading 78% hotel occupancy rate across nearly 150,000 rooms in H1 2023. The non-oil PMI has stayed expansionary for over 2.5 years, with businesses actively hiring. A Grade A office crunch looms.
?While prime neighbourhoods are already facing tight supply, Dubai's overall construction pipeline continues expanding. Knight Frank predicts 85,200 new homes could complete by end-2028, with apartments comprising 69% or 59,000 units. 40,000 homes are expected this year, though delays to 2023 are likely.?
?Excluding 2023's output, only 42,500 homes are projected from 2024-2028, just 8,500 annually - a 75% reduction versus long-term delivery rates. This signals impending chronic shortages, particularly as population swells per targets.
?Surging Demand Driving Price Rises?
?Dubai Land Department data reveals a buoyant real estate market in H1 2023, with 76,119 transactions valued at AED 283 billion ($77 billion). The sought-after Golden Visa further spurs foreign investment demand.
Findings by Knight Frank show sustained demand has steadily driven residential price appreciation. Properties saw a 4.8% price rise in Q2 2023 over Q1, and 17% year-on-year.
Apartment values have grown 21% since January 2020 to a current AED 1,290 per square foot average. The limited new supply amidst strong population growth has tightened vacancy rates, enabling steady rent increases.
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Villa prices have climbed even more markedly - up 51% over the same period to AED 1,520 per square foot currently. Their appeal remains high amongst families and HNWIs.
Despite gains, citywide values still remain 11% below their 2014 peak. Yet the multi-year uptrend shows no indication of slowing given the supply-demand imbalance. Further price inflation seems imminent.
This contrast is most apparent in prime areas like Palm Jumeirah, where villa prices have risen 11.6% in Q2 and 125% since January 2020. More budget-friendly locations are also seeing significant demand, evidenced by the 24% annual value growth in Dubai Hills Estate villas - the highest citywide.
?In summary, Dubai's breakneck population growth risks severely outstripping housing supply, further inflating prices.
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