Dubai’s property glut, which has driven down prices for more than half a decade, is expected to keep the real estate sector on the sidelines of the global boom in luxury residential prices.
After Dabeer’s real estate quickly emerged from the recession caused by the Coronavirus pandemic, the real estate development sector will provide an estimated 62,000 housing units in Dubai this year. It will also provide 63,500 units in 2022. This is the largest number since 2009, according to the consultancy Knight Frank.
This influx of supply will likely make Dubai, along with the Argentine capital, Buenos Aires, the only two cities on Knight Frank’s list of 25 major real estate markets to see a decline in the value of high-end residential properties.
Dubai’s real estate
“The imbalance between supply and demand has been a feature that has dominated the residential real estate market in Dubai since the great recession caused by the global financial crisis in 2008-2009,” said Faisal Durrani, head of Middle East research at Knight Frank.
He expected that “this reality will continue over the next few years”.
While wealthy residential property buyers, who fled to Dubai from the coronavirus lockdowns in their home countries, helped spur demand for luxury homes in the city earlier this year.
The Coronavirus pandemic has compounded the pressures caused by job losses and the departure of foreign workers from the city, which has reduced the demand for rent.
The ‘thriving’ list of residential projects in the pipeline suggests that chronic oversupply will remain a major weakness for Dubai, which is one of seven emirates that together make up the United Arab Emirates.
Attractive deals
however; Expectations also indicate that Dubai will be home to relatively attractive deals for large buyers and high net worth individuals, as for $1 million they could acquire 165 square meters (1,776 square feet) in the city.
Dubai has 42,356 homes, valued at one million dollars or more, and it ranks second after the British capital, London, in terms of the number of luxury homes.
But Knight Frank estimates that the value of luxury homes, each worth 3.6 million dirhams ($1 million) or more, is expected to decline by 2% in 2021 after declining 6% in 2020.
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