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70% 'are being priced out of Dubai property market'
A correction in Dubai’s real estate market could be exacerbated by a mismatch between demand and supply, with the bulk of demand being for more affordable properties than the ones that are coming on stream.
“Currently the supply is geared more towards the high end segment in an environment where prices have appreciated rapidly, so it’s like a double whammy,” Shuaa Capital real estate analyst Roy Cherry said.
“Seventy percent of Dubai’s population has been priced out and there are very few products that do target the low and mid income segment, which is effectively where the bulk of demand is.”
The city will continue to offer opportunities for developers who are able to target those income brackets.
“Not everyone in Dubai can afford a four million dirham property,” he said.
Shuaa Capital is forecasting a correction in Dubai property prices, beginning in 2009 and continuing into 2010.
Cherry distinguishes between the Dubai and Abu Dhabi market, with the former being “more complicated” due to the mismatch in supply and demand and project delays that have helped inflate prices.
Abu Dhabi is currently a more predictable play: demand is soaring and is likely to outstrip supply over the next three to four years, although negative sentiment in Dubai could have a contagion effect.
Both markets have seen a lot of speculative activity in recent years, but with less supply coming on stream, the impact of a correction will be smaller in the capital.
The emirate is also making significant investments in affordable housing. The Abu Dhabi government has recently granted Aldar over 10 million square metres of land for low income housing projects.
“I think overall the Abu Dhabi market is a healthy market…and I think Abu Dhabi companies will continue to do well. Not only because of the excess demand, but also because companies like Aldar Properties are already initiating work on low income housing projects with government encouragement,” Cherry said.
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Posted by paresh, dubai, dubai on 2 October 2008 at 20:41 UAE time
The whole scenario at this moment is guesswork. Ani is ept in the analysis of present market situation but more interestingly in the next 6 months we will see the effects( if any) of the current global macro economical money squeeze on the Dubai property market and secondly how many properties are actually completed by end of 2008. The availability of mortgages in Dubai is still at an infantile stage and thus will hardly have any effect on demand.
The demand for properties by institutional buyers is again hardly an issue to effect demand in Dubai. A majority of western countries are going to have a decline in their economies and this may cause a decrease in private investors from these countries but given that the total no. of properties sold to western nationals only amounts to about 17% of the total, a lot of what happens in terms of demand for off-plan properties will depend on Asian and G.C.C investors demand coming through.
Abu Dhabi has negligible supply at present and thus the prognosis that demand will exceed supply until 2012 although the prices over there are on the same level as Dubai although the capital has not even got a regulatory body or legislation to make investors feel more secure that Dubai has and thus it is possible that given the three or four government developers are the biggest source of supply that the government may feel it is necessary to slow down supply to a drip to avoid a major turbulence in prices over the short term.
Posted by arif sayed, dubai, uae on 2 October 2008 at 13:32 UAE time
Well.. am not so sure if once the affordable properties come on stream that prices will automatically go down.
We will see those with money snapping up these properties and rent them out ...
lets see
Posted by ANI RAY, Dubai, UAE on 1 October 2008 at 13:11 UAE time
While , everyone will agree that a Price Tag of 1 million Dollar + for Apartments are making Dubai Priced out to majority , the average Price of Abu Dhabi are much more than equivalent Dubai Properties, so there is litle solace there. However the major reason for Price increase in Dubai is increase of Land Price in New Development areas like Water Front or Maritime City etc, which is skyrocketing the Property prices in those zones. Development in other areas are trying to bench mark those prices while pricing their Properties, rather than their actual cost witha view to Profit maximization. As long as the market can take that, there is no harm.
Second , the statistics of 70% are misnomer , as it is not defined whether this takes includes or excludes Blue Coloured workers and in no cases, they will aford to buy properties.
To offer affordable housings, first areas to be earmarked and then Government agencies have to make real estate development in these areas and after completion of the buildings to rent it out the end users falling in that target bracket income. Only earmarking wont help as a private developer will always go for his profit maximization and the whole effort will be wasted.
Posted by brandaid, Dubai on 1 October 2008 at 11:56 UAE time
Ajman will go the way of Dubai, I hope you enjoy the commute daily, what about infrastructure in Ajman? Have you checked the power and water availablity? What if they can't deliver for another 5 years, what happens to the money you put into the property so far? Where will you live in the meantime? This whole place is devoid of reality...welcome to Fantasy Island...I'm your host, Mr. Rourke....the plane... the plane...where are the dwarfs? We can have circus here..but who will be the ring master...
Posted by sid, Sharjah on 1 October 2008 at 10:56 UAE time
Then come to Ajman. we just bought a flat for 500 Dhs/ SQF. The payments are construction based. So if the construction is delayed for any reason, then we don't pay. And Ajman is a much more livable place than Dubai. A lot less attitude here.