Off-plan property transactions set to dwarf equivalent 2016 totals
During the first half of 2017 the large amount of new project lunches in Dubai continued unabated. According to data provided by the Dubai Land Department, 68 new projects worth approximately Dh21 billion were launched throughout this period. These new launches have added to what is already considered a significant residential supply in Dubai that is anticipated to reach completion within the next four years.
The increasing number of new projects could develop into a potential issue that will need monitoring in the future; regardless of how well the new project lunches have been integrated into the market this year. The first half of 2017 has observed a very high amount of transactions, particularly in off-plan residential properties for sale. The overall decline in property prices of completed and secondary market units have brought buyers and investors back to the market, however, first time buyers have been attracted to the off-plan market because of their smaller unit sizes and cost conscious payment plans.
Which communities are being developed?
Data from the Project and Supply Tracker by Property Monitor suggests that approximately 6,000 villas/townhouses and 25,000 apartments are set to be completed by the close of 2017. The majority of the new stock will be in established communities such as Jumeirah Village Circle, Dubai Sports City and Dubai Marina.
With Expo 2020 quickly approaching the demand for completed residential projects is crucial, the expected supply for 2018 is even larger than 2017, with 36,000 apartments and 5,000 villas/townhouses estimated to hit the market. A significant fraction of this new supply will be in Dubai Sports City and Dubailand’s Remraam and Damac Hills.
Throughout 2019 and 2020, the completion of projects will shift from the more established communities to emerging areas such as Dubai South (near the airport) and Mohammed Bin Rashid City (MBR City). Dubai South is expected to receive approximately 3,600 units in 2019, while around 7,500 units are anticipated to be completed by 2020 in MBR City.
Supply in GCC-only freehold areas
The GCC-only freehold areas such as Bur Dubai, Deira and Barsha will also receive a necessary restoration, thanks to a joint effort by the government and large property developers including Nakheel, Meraas and Wasl Properties.
Examples of new landmark projects in these areas include Deira Islands and Maraas Al Seef, which are certain to entice investment and play an essential factor in the dynamics of the freehold residential sales prices and rents.
Off-plan property demand
The demand for off-plan property is very strong, as observed in the increased volume of transactions in the off-plan market. Data from Property Monitor suggests that the total number of off-plan transactions in 2017 to date has already surpassed the equivalent total for the entire 2016.
It is unclear how to estimate the effect off-plan transactions will have on the property market as a whole. The new supply entering the market has already had a moderating effect on rental prices and will likely to continue as more supply comes in. These declining rental prices will impact investor yields, which is why it is difficult to see increased off-plan sales having a positive impact on property prices, especially in the secondary market.