CBRE urges caution over Dubai construction pipeline

Real estate consultancy sees danger that supply could exceed demand amid glut of new project launches
CBRE urges caution over Dubai construction pipeline
By Andy Sambidge
Fri 25 Jul 2014 02:26 AM

Dubai's real estate construction pipeline needs to be monitored carefully to ensure supply does not exceed demand in the emirate, property consultants CBRE has warned.

The company has urged authorities in the emirate to remain cautious as the residential development pipeline continues to increase, with a rising number of new projects being launched month by month.

While CBRE admitted the pipeline is still far smaller than witnessed during the last cycle when Dubai's real estate market suffered a crash with prices plummeting more than 50 percent, it added that it "is nonetheless growing quickly and is certainly something to monitor carefully, with a danger that further down the line supply could again start to exceed demand fundamentals".

Mat Green, head of Research & Consultancy UAE, CBRE Middle East, said: “During 2014, close to 17,000 new units are expected to be completed with the majority of these set to be delivered in secondary locations such as Dubailand, Jumeirah Village Circle and Silicon Oasis. 

"Over the next four years roughly 65,000 new units are penned for completion, with 83 percent of these apartments, and villas and townhouses comprising the balance.”

According to CBRE's Q2 marketplace report on Dubai, both rentals and sales prices in Dubai continue to rise during the second quarter despite recent regulatory changes, albeit at a marginally slower rate than was recorded during Q1.

The overall Dubai Residential Price Index showed rental increases of almost 20 percent over the last year, with apartments registering an increase of 21 percent while villa rentals grew by almost 10 percent.

Quarter-on-quarter, rental growth has been more marginal at around 3.2 percent, with apartments rising by 3.6 percent and villas by 1.4 percent. 

The strongest sub-markets for apartments were Business Bay, The Greens, Sports City, International City and Motor City.

For the sales market, the quarterly change in sale prices was registered as a little over 5 percent, the same figure that was recorded the previous two quarters, suggesting that demand remains strong despite the implementation of higher transaction fees. 

On an annualised basis, prices are now 31 percent higher than the same period last year with the strongest rises seen in International City and Jumeirah Village Circle.

“With sustained demand for both occupational and investment properties, we anticipate that residential rental and sales growth will continue throughout 2014. However, we expect growth levels to be lower than 2013 performance as affordability becomes a more influential driver of property moves,” said Green.

For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.