Right now, we’re witnessing one of the most exciting periods on record for the Dubai real estate sector – along with economic stability that must be making other nations weep.
However, with a rapidly growing population the emirate’s property market could soon face an issue with undersupply of larger properties – three or more bedroom apartments, townhouses, and villas.
A simple statistic like the growth of schools from 17 to 220 since 2005 indicates that more families are moving to the emirate and staying put – leading to increased demand for homes with at least three bedrooms to accommodate children.
And as student enrollment across Dubai private schools reaches record highs, according to recent reports from Knowledge and Human Development Authority (KHDA), it does seem that demand for family friendly properties continues to increase.
Yet, will the supply of such units keep pace?
Many new Dubai developments continue to focus on smaller units, driven by a perception that they yield higher returns on investment. While this may be true in the short term, it overlooks longer term trends and the needs of an ever-growing population of expat families.
This situation also drives up prices for existing stock, making it increasingly difficult for middle income families to find affordable housing that meets their requirements. The lack of larger units could also impact the rental market. Families who can’t find suitable properties to buy may turn to renting, further tightening the market and driving up rents.
So, what’s the solution?
Dubai developers must recognise and respond to this growing demand for spacious family homes by reassessing their current development plans and prioritising the construction of larger units.
Policymakers also have a role to play in incentivising the development of such properties through zoning laws, tax breaks, and other measures that encourage builders to cater to this segment of the market.
To be fair, some developers have started to catch up with demand with recent launches such as The Heights Country Club & Wellness by Emaar (coming soon), Riverside by Damac, The Watercrest by Ellington, The Acres by Meraas, Haven and Athelon by Aldar, and Tilal al Ghaf by Majid Al Futtaim – all of which boast larger family-friendly homes. More are needed.
For investors keeping an eye on the Dubai market, this undersupply of larger units presents an opportunity, as a lower supply generally increases the chance for good capital appreciation and strong rental yields.
Investor opportunity
The current landscape is ripe with opportunity overall due to the rolling out of the ambitious Dubai Economic Agenda D33, which aims to almost double the economy over the next decade and establish the city among the top three global hubs for business and investment.
It has some eye-watering targets: increasing foreign trade to Dh25.6 trillion, foreign direct investment to Dh60 billion annually, government expenditures to Dh700 billion, private sector investments to Dh1 trillion, and enhancing domestic demand for goods and services to Dh3 trillion.
There are also efforts to push Dubai southwards in line with the gigantic new passenger terminal at Al Maktoum International Airport which will replace all operations at Dubai International (DXB) and hold the world’s largest capacity annually. It is predicted that around one million people will be living in Dubai South by 2040.
Indeed, Emaar has been putting its stamp in the south Dubai area with the announcement of four master communities in the pipeline. Savvy investors are already jumping at the chance with Riverside, Oasis, Haven, Athelon and Watercrest selling out within days.
In terms of apartments, as the Dubai population grows, and more families move here many could be priced out of townhouses and villas which will create demand for more two to three bedroom apartments which are in short supply. So, there’s a great opportunity for investors here too.
We are having conversations right now with astute investors making considered choices to identify the areas, payment plans and quality products, as well as the most lucrative choices based on what the data is indicating with these pockets of potential undersupply.
As ever with great investing, timing is everything.
