Report predicts oversupply of residential property
The Investment Boutique report says 500,000 new expats will be needed.
Dubai will have an excess of 115,000 unoccupied residential units by the end of 2012, according to a recent industry report.
Commissioned by market intelligence firm Investment Boutique, the Dubai State of the Market Report 2010 suggests that as many as 500,000 people, not including unskilled expats, will need to move to Dubai in order to the fill the units.
The oversupply of real estate and property in the region is reportedly due to a decline in the expat community and fall in demand for residential property during a rocky 2009.
Researchers from Investment Boutique said: "There were minimal transactions throughout most of the year and the numbers paled in comparison to the boom time era.”
“There was constant downward pressure on both sales prices and lease rates that had landlords and owners competing for tenants and buyers for the first time in Dubai's recent history. Units demand decreased in 2009 due to a falling expatriate population."
With a large number of projects expected to be cancelled or delayed over the coming months, oversupply of residential property poses the biggest threat the city’s real estate market.
And with rents and property prices moving towards their lowest levels, researchers at the market intelligence company expect the real estate sector to remain fragile for at least the rest of the year.
According to the report: "Affordability will be paramount going forward, as speculators have left the market and demand is being created by end users. Downward pressure on prices is expected to continue until affordability matches income levels. The majority of demand is likely to remain for rentals as opposed to sales."
The good news is that the residential market is expected to pick up slightly next year as the population in Dubai starts to increase again.