UAE property oversupply tumbles from 105,000 to 45,000 units in less than 12 monthsPosted on 04 December 2012 with no comments from readers
An astonishing and totally unprecedented take up of residential real estate since the start of 2012 has brought the oversupply of villas and apartments in the UAE tumbling by 60,000 units from 105,000 to 45,000 so far this year, according to a review of propertyfinder.ae data by ArabianMoney.
This massive reduction in the oversupply of property left over from the 2003-8 construction boom leaves only 24,675 units for sale and 17,291 for rent in Dubai, and 1,922 for sale and 3,412 available for rent in Abu Dhabi.
How is it that the Emirates has filled up so much space in such a short time? Well for one thing the completion of real estate last year was well down on industry forecasts.
Independent research by Fouad Bardawil, the patriarch of Emirates Specialities Company, suggests that only around 10,000 units were actually completed in 2011 and less than 20,000 this year. Units delivered in 2009 and 2010 were also badly hit by the construction slump that followed the global financial crisis in the UAE.
However, the main factor explaining the decline in vacant property must be the big increase in the population this year due to the expansion of local businesses and an influx of exiles from the countries affected by the Arab Spring. Citibank’s analysis of local school rosters suggests an eight per cent increase in the national population this year.
That would represent roughly 160,000 new residents or perhaps 50-60,000 new households, and that almost exactly matches the take up of the real estate oversupply identified by ArabianMoney’s study today.
Fouad Bardawil has broken down the inflow of new residents by company and sector. The burgeoning hospitality and aviation sectors, for example, have brought considerable demand for new accommodation as well as homes for the staff working new companies with the granting of new company licenses up about 30 per cent.
His work also projects future demand for housing continuing to exceed the delivery of new property. On current trends demand will actually exceed supply within a couple of years.
Not only is this a remarkable turnaround from the real estate bust of 2009 but it shows that renewed plans for large new construction projects in the UAE are far from being misplaced. Such projects will take time to deliver new accommodation and by the time they are built these units are going to be needed.
It seems the recovery of Dubai house prices this year is based on far more than optimism generated by enthusiastic estate agents. Already the supply of the most desired homes is getting short and it is market demand that is pushing rentals and prices higher. This trend seems set to continue over the next couple of years as predicted by the latest issue of the ArabianMoney investment newsletter (subscribe here) which highlights the best locations to buy.