Samir Salya on the Problems of Property Oversupply in Dubai

The Dubai property market is facing the threat of oversupply in the face of growing competition, according to Gulf General Investment Company (GGICO). The UAE-based developer’s forecasts for the future of the real estate sector come as the demand for property in Dubai begins to stabilize. With investment increasing and sales decreasing, the market is witnessing a fall in prices.

Higher competition

As more companies have entered the market over the past few years, supply has exceeded demand in the region. This is forcing a drop in sale prices. The large number of companies entering the market unrestricted is increasing competition for sellers, introducing lower prices for buyers.  A report by real estate consultancy Cluttons show residential prices continued to slip throughout 2017, decreasing by 1.9% from Q2 to Q3. This led to the annual rate of change standing at -5.6%.

Commenting on the lower return on investment and slowing sales, Bshir Osman, Head of Engineering at GGICO told Construction Week: “I believe that the market is oversupplied for the time being and that this point must be controlled.”

With developers forced to drop prices and oversupply, the market is witnessing a strong decline across all areas.

Expo 2020 leading intensity

This trend of oversupply looks to continue in 2018, with Expo 2020 bringing large numbers of new constructions to Dubai. According to JLL’s 2017 Dubai Real Estate Market Overview Report, 80,000 units could be delivered to the area as construction intensifies for Expo 2020. Although this event is likely to bring some stability to the area, years leading to this could see a rising rate of oversupply.

Hope for the future

Though prices have seen a decline and oversupply remains a problem, 2017 data by the Dubai Land Department (DLD) shows that Dubai remains a desirable investment location. Taking the DLD’s definition of transactions as including housing stock, land, new mortgages and other transactions, the region saw growth. Transactions in 2017 totalled 69,000, a 14% increase year on year. The value of these transactions increased by 6% to AED 285 billion. With foreign buyers accounting for more than 75% of all purchases in 2017, the region continues to attract global interest.

Speaking in the report, Director of the Dubai Land Department, Sultan Butti bin Mejren, states: “[The data] confirms the current strength of the Dubai real estate market, when compared against the past two years.”

He continues: “Among the positive signs of the report is the lead UAE nationals have in investments, as well as the diversity of the investor base which reflects the attractiveness of the Dubai real estate market to global investors.”

About Samir Salya

Samir Salya is the Chairman of Reign Holdings and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.