The residential property market supply in Dubai has been lagging behind population growth and shortage has also been seen in the affordable segment after luxury in some areas of the city.
According to industry executives, the demand will continue to outpace supply even in 2024 because residents are increasing turning into buyers because of rising rents and the high influx of foreigners.
In 2023, the total number of residential units that were handed over in the emirate stood at 50,000, which is almost half of the increase in population.
Dubai Statistics Centre data showed that in 2023, the population in the emirate rose by more than 100,000 to over 3.65 million in mid-December.
This saw the demand for residential properties go up. The rise in population is said to be due to the high influx of investors, professionals and foreign workers who have entered Dubai this year.
It is mostly due to the introduction of various residency permits and the attraction of generating a higher return on their investment.
The 9-month data from the Dubai Land Department (DLD) reflected the same, as it showed that there was a 33.8% increase in transactions to 116,116 and they were valued at AED 429 billion.
In recent years, there has been a growth in price due to undersupply in some areas, such as waterfront locations, villa market and established and mature communities that do not have any more land left for development.
In such segments, the supply is significantly lower than demand, which drives up the price. Analysts said that demand is driven by positive sentiment, strong economic fundamentals and inbound population growth.
Rather than paying the rising rents, most tenants are giving preference to home ownership. The first half of the year saw a high demand for bigger homes and supply shortage in prime locations.
More recently, there has been a shift in the demand trend towards more affordable areas, as buyers are looking for potential future appreciation in investment and lower prices.
Some of these areas include Dubai Production City, The Greens, Business Bay, Jumeirah Village, Dubai Silicone Oasis and Discovery Gardens.
In order to keep pace with the growth in population, 50% more new properties would be needed in Dubai every year.
Homes in prime, central and established residential communities are in significant demand, but available land is in short supply.
Therefore, construction of new residential properties in the same area is no longer feasible. This has led to construction of residential projects and units in other areas of the emirate.
These areas include up-and-coming suburbs, such as Townsquare, Arjan, Jumeirah Village Circle (JVC) and Dubai South.
It usually takes years for new residential property market supply to be delivered, as there are a number of stages from concept to delivery.
Developers also have had to face a number of supply chain challenges post-COVID-19, along with rising costs of construction.
This led to delays in handover of new home launches, but developers are trying to speed up because they want to take advantage of the strong buyer demand.