Developers fast completing residential projects ahead of Expo 2020 Dubai
Residents will be able to buy or rent properties on more flexible terms and conditions as record 41,000 residential units are expected to come online this year due to higher materialisation rate of projects ahead of Expo 2020.
The latest data issued by Property Finder Group indicates that the up-and-coming communities in Dubai are likely to see more homes completed this year while the established neighbourhoods will see only a few additions to their inventory.
The real estate portal said 30 per cent of the 41,000 residential units under construction in Dubai this year are 96 per cent to 99 per cent complete with Jumeirah Village Circle is expected to deliver 3,400 homes, the highest in Dubai.
Lynnette Abad, director of Research and Data at Property Finder, said this is an excellent time for those who are looking to purchase property.
"Considering more than 70 per cent of expats rent, this new supply is very much welcomed as residents are benefiting by upgrading the community in which they reside. As the Dubai property market matures, residents are finally seeing rents reduced to a level that is considered affordable and, in turn, their cost of living is going down," she added.
Shaher Mousli, chairman and CEO of Arthur Mackenzy Properties Group, said 2018 was a slow year in comparison to 2017 and 2016, which caused some projects to slow down. However, last year, there was an influx of investors who came in and pumped money into these projects that were offered to them at good price points by owners and landlords.
"Usually, opportunities arise for investors when there is a slowdown in the market. During a crunch time Dubai has always presented lucrative opportunities to external investors which enables project completion," he said.
"I believe that a main reason for many projects heading towards completion now is to meet the expected demand during Expo 2020," Mousl told Khaleej Times.
Over 28,000 homes were handed over in Dubai in 2018, which has been more than the number of units handed over in the past few years, according to Property Finder report.
"I believe Dubai's real estate market has been extremely resilient in a cloudy weather and continues to remain one of the highest yielding internationally. There are several projects anticipated to complete this year, which in turn will offer the consumer a wider choice in location, price and quality," said Atif Rahman, director and partner of Danube Properties.
Due to the delivery of these projects, he said a bit of pressure will be felt, but should not be considered a sign for worry. Like it has happened historically in every global market, it will even out over a period of time with the increase in demand through growth in population, he said.
"I expect the demand to catch up from Q3, which shall create the upward momentum for sale price and rentals. It's a great time for end users and investors to take advantage and be ready to reap the results," he said.
Higher materialisation rate
Although, over 41,000 homes are scheduled to be completed in Dubai in 2019, there is usually a considerable gap in what is announced and what enters the market. Actual deliveries have been 30 per cent to 50 per cent lower than developer projections. This is because developers usually adjust supply to match actual demand, the report said.
Referring to JLL report, Abad said traditionally materialisation rate has been 40 per cent to 50 per cent. "Supply hit a peak in 2018, however that doesn't mean the materialisation rate changed due to the number of projects under construction and new project launches," Abad said.
As of February 2019, the 41,000 units slated for completion in Dubai, 30 per cent are 96 per cent to 99 per cent ready, according to Property Finder. Moreover, 32 per cent of under-construction projects are 91 per cent to 95 per cent complete while 29 per cent of projects being built are 85 per cent to 90 per cent complete. This may result in a higher materialisation rate of projects this year, the report said.
"One of the key reasons behind higher materialisation rate of projects is partly due to the Expo 2020 factor, as most of the projects were planned to support the growth, which is expected from the Expo," Rahman of Danube Properties said.
He attributed the credit to strong regulatory environment that ensures healthy project delivery and high investor confidence. "The support and control from the regulators has made every Property developers more responsible towards their obligations to complete projects on time."
Referring to Core latest report on Dubai property market, its head of Research and Advisory Prathyusha Gurrapu said majority of the deliveries are in the affordable to mid-market segment, with Dubailand and Jumeirah Village Circle and Triangle accounting for one-third of all handovers.
"Although the pace of price softening has relatively slowed, we expect a lag in sales and rental price recovery as existing vacant stock and future supply over the next couple of years is expected to outpace steady demand," he said.
He said many of these developments were planned during the 2014-15 peak.
"We also foresee developers aligning deliveries in the run up to Expo 2020. We have seen handovers increase over the last year, with over 21,700 units delivered in 2018 and expect a higher number of deliveries over 2019 and 2020, despite taking into account conservative realisation rates," he said.
A good start
A total of 4,441 residential units have been completed in Dubai in the first two months of 2019, of which 4,184 were apartments and 257 were villas and townhouses, according to Property Finder research.
Jumeirah Village Circle will see the highest number of homes completed this year (3,408) and accounts for 8.19 per cent of the upcoming supply in 2019. Business Bay is next up, with 3,152 homes slated for completion in 2019 and accounting for 7.57 per cent of the supply. Third is Dubai Sports City with 3,098 homes to be ready in 2019 and contributing to 7.44 per cent of total supply.
In the areas where new supply will be released, sales and rental prices will continue to adjust based on market demand," Abad said.
"Over the last year, this has given opportunity to a new market trend where we have seen a significant amount of renters converting into home owners and we believe 2019 will be the year for end-users," she said.
"For those continuing to rent, we will continue to see the trend where many will upgrade to bigger units or move to more desirable areas with sought after amenities in addition to retaining negotiating power. Both of these trends have increased the amount of disposable income which contributes to the overall economy," she explained.
New developments such as Mohammed Bin Rashid City, Al Furjan and Town Square will each add over 2,000 homes to Dubai's residential market this year. Other new projects like Akoya Oxygen, Mirdif Hills, Dubai South and Damac Hills will each add over 1,000 units to Dubai's residential market across 2019.
Established communities such as International City (512), the Palm Jumeirah (289), Dubai Motor City (276), Dubailand (188) and Jumeirah Golf Estates (95) will only contribute a small portion of the supply pie in 2019.
Bucking this trend are communities such as Downtown Dubai (1,772) and Dubai Marina (944), where considerable construction activity is still on and therefore will see more home completions.
To a question about affordable share in estimated 41,000 units to be completed this year, she said: "If we look at the areas where majority of the supply will be completed, we can expect to see affordable stock in quite a few areas including JVC, Sports City, DSO, Dubailand, Arjan and Dubai South which account for about 33 per cnet of the 41,000 to be completed."