Dubai Property Market Case Study

Although growth in Dubai’s maturing real estate markets has been slower than expected in 2018, Premier Estates believe there are encouraging signs of recovery. Buyer activity has remained buoyant throughout the year; with Dubai’s property market showing resilience in a climate that has seen economic slowdown, regional uncertainty and a rising US dollar. We believe that Dubai remains the GCC’s strongest property market and for that reason have an optimistic outlook for 2019.
Dubai’s GDP is expected to grow from 2.2% year-on-year in 2017 to 2.5% in 2018 and employment is forecast to rise by 1.6% to the end of next year. Both factors are set to have a positive impact on the real estate market in Dubai, as we draw ever-closer to hosting the World Expo in 2020.
Despite the mostly positive indications of Dubai’s property market performance this year, it may not be in the clear just yet. Average sales prices in the Emirate’s residential sector fell just short of 1% in the first half of the year, with rents seeing more dramatic declines of 4.2% for apartments and 6.5% for villas.
Dubai’s Office Sector
We have seen relatively flat performance throughout 2017, with average office rents declining by 4.5% in the first half of the year. This has however incentivized more businesses to look for opportunities for relocation in Dubai and as a consequence, rents for Grade A office space in the central business district (CBD) are expected to increase significantly in 2018. Conversely, lower quality office space in less attractive locations has fallen in appeal to occupiers who are concerned about the quality of office furniture and future management and maintenance.
Construction Activity in 2017
Entering into Q4 of 2017, more than 5,630 buildings covering a total area of more than 75 million square feet have completed construction. Figures from the municipality of Dubai show that around 28,600 buildings over 551 million square feet are currently under construction in the Emirate. Construction activity has increased in terms of infrastructure projects and residential development and according to media reports, Dubai could see another 80,000 homes added to existing supply over the next three years.
According to the Dubai Statistics Center, with population growth averaging at around 5% annually, there will be an extra 441,000 new people to house by 2020. With the average household size at 4.2 family members in Dubai, this translates into a need for around 105,000 more residential units over the next three years.
Despite any concerns there have been about the relative slow performance in Dubai’s housing markets this year, there is still widespread optimism for the future. In the current climate, supply and demand appear to be well matched and should remain in line with population growth as new homes are built and added to stock. We feel that there are significant signs of improvement on the performance of Dubai’s property market compared with last year and that predicted growth in the market is likely to be sustainable over the long term future