Dubai property for sale or rent falls by 40% as oversupply shrinks

Posted on 04 April 2011 with 2 comments from readers

Last June ArabianMoney did a search on the propertyfinder.ae website and found 32,000 properties for rent or sale. Today that total is a little over 19,000, a 40 per cent drop in vacant property in nine months. Most significantly the number of units available for sale is down by more than half to 4,900.

Is the great property oversupply story being exaggerated? Probably not because there are many projects coming up to completion, and there are other towers that are completed and have not been put on the market.

Market forces

The control being exerted over the marketplace is, however, quite impressive. This sort of discipline is what keeps prices relatively stable in a difficult market.

Last week Marwan Bin Ghalaita, director general of the Real Estate Regulatory Authority told ArabianBusiness: ‘The market is in a stable state. We are seeing around 50 transactions a day in the Land Department and I am talking about fresh transactions. It’s those coming to Dubai to take advantage of the opportunities in real estate.’

Take 50 transactions a day and multiply that by say 200 working days and you get 10,000 transactions a year. That does look a very healthy rate of deals and must help to account for the falling stock of homes for sale on propertyfinder.ae.

Mr Bin Ghalaita also said his estimate of the number of new units that would be completed in 2011 was 10,000, so that would have new supply exactly matching demand. In the same interview he noted that his department is reviewing 90,000 units scheduled to come onto the market by 2016.

Earlier this year he promised many of the 220 projects in Dubai would be officially cancelled this year, allowing off-plan investors to get remaining monies back but cancellations have been very rare thus far.

Population explosion

New data on UAE population growth also supports the demand side of the Dubai house price equation. According to the UAE Statistics Bureau the national population grew by 65 per cent from 2006 to the middle of last year to 8.26 million, with most of that growth before the global financial crisis. Growth slowed to 64,000 in the first half of 2010.

The growth was down to a continued influx of expatriate workers, with nationals falling to 11.5 per cent of the population. Even with some possible net losses since then a population rise of that strength will surely have built up suppressed demand for property as it becomes available in the right places.

So is the Dubai, and by extension the UAE property market turning around more quickly than the pessimists have argued? That looks to be the case. Why is another story but fingers point in the direction of Bahrain for a recent surge in demand.

But the overhang of more highly priced, luxury apartments in locations like the Dubai Marina and Palm Jumeirah areas is still not going to be easy to shift, particularly if the global economic recovery turns out to be an illusion.

Bargain hunters may still have one last chance to buy at cheaper prices. The ArabianMoney newsletter is the best way to track these opportunities on a monthly basis (click here).