February 16 2016
By Lookup.Ae Sales
Dubai Real Estate Market Outlook Part 3. In this report we take a closer look at expected supply for freehold residential property in Dubai. Most of the information is drawn from the Lookup.ae database which reports on over 98% of all freehold developments in the city. We will explore 2016 and beyond supply and will also demonstrate where the majority of future supply will be delivered and its impact on the real estate market.
Reporting Supply figures in Dubai
Reporting Supply numbers in Dubai may have become slightly controversial since a Nov 2015 opinion published by Damac’s Chairman stating his belief that Real Estate Consultancies in Dubai have been unable to accurately report on expected deliveries in a realistic manner.
These are the kind of challenges faced when trying to accurately report supply figures in Dubai:
- Limited information provided by Developers. Consultancies have to rely on Developer press-releases, statements and master-plans to gauge supply. In some cases, developers do not disclose total number of units being built.
- Developers themselves often give optimistic delivery timelines. As an example, Damac themselves stated that limited parts of their Akoya development would be delivered in late 2015.
- Many large scale developments are delivered in phases and there is limited information provided by Real Estate developers on phase-wise deliveries.
- After developments are officially completed, there may be delays experienced in getting necessary Municipality and Utility approvals and handovers are pushed back.
- At the same time, Real Estate consultancies have to be able to make important judgement calls. As an example, when NSHAMA Town Square unveiled their master-plan in early 2015, their development objective was to launch 3,000 townhouses and 18,000 apartments over the course of development. In reality, only 1,100 townhouse units and about 1,500 apartment units have so far been launched but some real estate consultancies are reporting master-plan figures rather than actual launches.
A historic perspective on Launches vs. Deliveries
Below are a series of graphs that show freehold residential units supply in Dubai in a number of different ways.
The graph below shows freehold units delivered vs. new freehold units launched. A lot of the supply launched between 2006 – 2008 was ultimately cancelled or put on hold indefinitely.
The below graph shows the delivery of freehold units from 2003 till 2015 and projects future deliveries from 2016 – 2019.
The chart below gives some very important perspective. As of Dec 2015, under-construction supply is 37% of ready supply. In late 2008, when the market experienced a major decline, under-construction supply was 332% of ready supply.
A closer look at future supply
We currently estimate that there are a total of 68,644 freehold residential units under-construction in Dubai. The breakdown of this supply is as below:
As has been well documented, the majority of future supply is high-end or luxury quality. This ratio is expected to gradually change over the next 5 – 7 years. A large number of planned new projects which will bring more mid-end supply to the market including Town Square, Jebel Ali Gardens, Mirdiff Hills and Dubai South. However we do not included proposed / planned supply as future supply. Only when projects are officially launched and break ground do they constitute a future supply.
The below info-graphic shows where the majority of future freehold residential supply is expected to be delivered. The projected deliveries for areas like Marina, JLT, JBR, Downtown Dubai & Palm Jumeirah will lead to these areas being almost completely mature with little prospect of future development. Major areas like Al Qudra, MBR City, Lagoons will see the majority of new launches and future construction beyond 2019.
What is expected to be handed over in 2016
Barring delays or Government initiatives to control supply being released in the market, these are the projects expected to be handed over in 2016. We should note that many of these projects were originally expected to be delivered in 2015 but have been pushed back. Also note that this list includes only freehold developments; Lookup.ae does not report on non-freehold projects in Dubai.
Projected to have at least 907 units delivered. Deliveries include five Azizi buildings, Avenue Residence and 171 townhouses in Dreamz by Danube.
Al Qudra Road
Projected 1,754 deliveries: 2 further communities within Arabian Ranches 2 are expected to be delivered this year: Palma and Rosa. We also expect deliveries to commence for Mudon Phase 2 and remaining 300 units in Sustainable City. The major supply will take place on the deliveries of Mira Phase 1, 2, 3 & 4 which have an estimated 1,000 townhouses.
The largest single delivery projected for this year is Al Khail Heights which contains about 2,158 apartments and 58 townhouses. It remains to be seen whether all of this supply does get delivered. Delivery dates for this project have been revised at least twice already. This project will bring a lot of mid-end supply in a centrally located area of Dubai.
We expect at least partial deliveries of Villa Lantana to commence. A total of 440 units are under-construction in Lantana and we project at least half of that will be delivered in 2016.
Business Bay & Downtown
We do not include hotel serviced apartments as residential supply. We expect buildings such as The Pad, Al Safeer Tower 1 & 2 and a couple of Damac buildings to be handed over in this area.
Emirates Living, Jumeirah Park & Jumeirah Islands
Only Jumeirah Park Legacy Nova villas are expected to be handed over this year (a total of 460 independent villas).
International City & Silicon Oasis
At least 7 freehold buildings expected to be delivered in Silicon Oasis. We expect Warsan Village townhouses by Nakheel to be partially handed over this year.
JVC, JVT & Sports City
These three areas will see the largest concentration of deliveries. Total projected handovers are 4,466 apartments and about 136 villas & townhouses. Most of this supply was projected to be delivered in 2015 and it will not be a surprise to see at least half of this supply delayed till 2017.
Marina, JBR & JLT
Expected handovers include Dubai Star, MY Tower, Pier 8, Wind Tower 1 & 2, Marina 101, Escan Marina and Damac Heights.
The first units in MBR City should start handing over this year. Millennium Estates should be completely handed over and we expect very partial handovers of The Polo Townhouses and District 1.
Mohammad bin Zayed Road (other)
We expect partial handovers of Living Legends to take place (villa and some apartments). A handful of deliveries are expected in Liwan, Arjan and Queue Point.
Expected handovers are Club Vista Mare, Azure Residence, Viceroy Palm Jumeirah and Kingdom of Sheba.
- There are approximately 68,000 freehold residential units currently launched and in the construction phase. This supply will be delivered between 2016 – 2020.
- Close to 19,000 freehold units are expected to be handed over in 2016; however, going by previous years, a lot of that supply could still be pushed back to 2017. However, we do expect much more freehold residential units to be delivered in 2016 versus the previous year.
- We expect very few new projects to be launched in 2016. In the previous 3 years, some 55,000 new units were launched in Freehold Dubai. Developers may have to revise prices or payment-plans to attract buyers and this is a trend we are already starting to see.
- Majority of future supply is concentrated along Al Qudra Road, Mohammad bin Rashid City, Jumeirah Village Circle and Dubai Sports City.
- Majority of future supply is high-end or luxury quality. Mid-end real estate constitutes only 37% of future supply. This ratio is expected to change as more affordable planned projects are formally launched.
- By 2020, almost all the communities along Sheikh Zayed Road and Mohammad bin Zayed Road would have reached a very mature stage. We will not be seeing much new supply coming up in these areas. Future supply beyond 2020 will be concentrated in areas along Al Qudra Road, Mohammad bin Rashid City, The Lagoons, Jebel Ali and a few other areas marked out as master-developments.
- The impact of future supply will not be felt as strongly in the communities along Sheikh Zayed Road which is and will remain the core prime area of the city. However, the new supply will most definitely impact capital and rental values along Mohammad bin Zayed Road and Al Qudra Road.
- It is important to keep some perspective on future supply. Unlike 2006 – 2008, the ratios and numbers in relation to future supply is not as significant. Future supply will bring more affordability, choice and competition to Dubai and benefit the city in the mid to long-term.
This report was written by Gibran Y. Bham, a Co-founder of Lookup.ae
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