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Questions raised over Dubai property supply amid gloomy price forecast

The fall in residential prices in Dubai which has been taking place over the past three quarters looks set to continue for the second half of this year and the early part of 2016.

The underlying problem appears to be that builders keep outpacing buyers – although at least one developer is wondering if local consultancies’ forecasts are overstating the outlook for supply.

Looking back to the first quarter of this year, CBRE’s UAE head of research and consultancy, Matthew Green, says that sale prices dropped by 2 per cent and rental growth stayed flat.

“We’ve seen these trends continue into Q2, and we see them continuing into the rest of the year,” he said. “In fact, there may be a speed in the pace of sales decline.”

He attributed this to the considerable pipeline of properties that are due to come onto the market this year. At the start of 2015, CBRE predicted that there would be 23,000 new homes delivered in 2015.

“We think that may come down somewhat, but we still think there will be around 20,000 completions,” Mr Green added. That represents a significant ramp-up in supply. In 2013, around 14,000 new homes came onto the market and in 2014 that increased to 16,000.

When asked whether he thought this was made up of projects that were launched prior to the 2008 financial crash, or new launches that have occurred over the past three years, he said it was “a bit of both”.

“There is a lot of product coming in from areas like Sports City and Dubailand. The projects that have been restarted are the ones being completed there. But there are also Downtown Dubai projects that will be handed over and these have been launched in the current cycle.”

Niall McLoughlin, senior vice-president at Damac Properties, said that there has been a lot of unnecessary doom-mongering about the state of Dubai’s property market, and that the pipeline of new homes due to be delivered this year has been overstated by the property consultancies, whose estimates have ranged from 16,000 new units to 23,000.

The fall in residential prices in Dubai over the past three quarters looks set to continue for at least nine more months.

The underlying problem appears to be that builders are outpacing buyers – although at least one developer is wondering if consultancies’ forecasts are overstating the outlook for supply.

Looking back to the first quarter of this year, CBRE’s UAE head of research and consultancy, Matthew Green, says that sale prices dropped by 2 per cent and rental growth stayed flat.

“We’ve seen these trends continue into the second quarter, and we see them continuing into the rest of the year,” he said. “In fact, there may be a speed in the pace of sales decline.”

He attributed this to the considerable pipeline of properties that are due to come on to the market this year. At the start of this year, CBRE predicted that there would be 23,000 new homes delivered in 2015.

“We think that may come down somewhat, but we still think there will be about 20,000 completions,” Mr Green added. That represents a significant ramp-up in supply. About 14,000 new homes came on to the market in 2013, and last year that increased to 16,000.

When asked whether he thought this was made up of projects that were launched before the 2008 financial crash, or new launches that have occurred over the past three years, he said it was “a bit of both”.

“There is a lot of product coming in from areas such as Sports City and Dubailand. The projects that have been restarted are the ones being completed there. But there are also Downtown Dubai projects that will be handed over, and these have been launched in the current cycle.”

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