One of the major factors contributing to the decline in real estate rents and prices in Dubai over the past few years has been the excess levels of new supply to the market. This week a higher committee for Dubai’s real estate planning was launched by the government to enable a healthier balance between supply and demand.
The higher committee, headed by Deputy Ruler Sheikh Maktoum bin Mohammed and senior property developers, has been tasked with introducing measures to improve the balance between supply and demand and ensure that semi-government real estate companies do not compete so directly with private investors. As part of this mandate, the committee will develop a comprehensive strategic vision for all major real estate projects in the emirate for the next ten years.
“This initiative is welcome news for Dubai’s real estate industry and represents a positive step towards achieving a more balanced market for the Emirate. High levels of recent supply are being felt across both the commercial and residential sectors and while not all proposed projects will complete on schedule, we do expect to see a significant spike in project completions across the residential and commercial sectors over the remainder of 2019,” commented Thierry Delvaux, CEO of JLL MENA.
The average level of residential completions in Dubai over the past three years has been around 20,000 dwellings per annum, while as many as 60,000 dwellings are scheduled for completion in 2019 alone. A similar increase in new supply is also being witnessed in the retail sector where completions this year could exceed 600,000 sq m, compared to an average of 233,000 sq m pa over the past three years.
“The extent to which this new committee can regulate and achieve an improved balance of supply and demand remains to be seen, but recognition of the current imbalance and the implementation of a plan to counteract this problem are key steps towards making a change,” commented Delvaux
He added, “The ‘build it and they will come’ model has served Dubai well in the past but now is the time to be reviewing this approach and create a more balanced market. Achieving this objective will inevitably require more controls on the level of future supply than have been implemented in the past, but it is an initiative set to improve the country’s long term economy.”