The supply in residential units across Dubai has increased over the third quarter of the year, a new report revealed.
According to JLL’s Q3 2017 Dubai Real Estate Market Overview report, the majority of completions during the third quarter were apartments, with a further 3,300 units expected to be delivered so far.
With construction activity likely to accelerate in the next two years, JLL data is suggesting up to 80,000 units could be delivered before the end of 2019, although actual deliveries are likely to be below this level.
In this regards, more than 480 units in the residential segment could be delivered before 2020, fuelled by the upcoming Dubai Expo.
Craig Plumb, head of research, MENA, JLL, said: “This renewed sentiment does however raise the prospect of a potential over supply on the back of sales achieved through more attractive payment terms.”
As for sales prices, villas and apartments remained largely stable over the quarter, with evidence suggesting an increase in the number of vacant apartments in the city, including in prime locations such as Downtown Dubai and Marina.
As a result, tenants have been able to renegotiate their rents downwards by an average of 5% to 7%, the JLL report highlighted.
The total value of transactions of existing residential properties, excluding land, has also increased over 2017, with sales in the year to August exceeding AED3.7bn, up by 28% from the AED10.7bn recorded in the YT August 2016.
Other real estate consultants echo these sentiments, including Core Savills, whose recent survey highlighted a less optimistic market this year as compared to 2016.
Only 34% of the respondents from that survey believed that Dubai’s real estate market has displayed signs of recovery, as compared to 50% in the previous year.
David Godchaux, CEO of Core Savills agreed that oversupply in some segments of the market was evident, explaining that though there will be a lot of supply in the bottom to mid-market segments in the coming years, this in turn raises the question of whether there will be enough occupiers for these units by 2020.
“We’ve seen a recovery that started in some communities in January 2016 for about 12 months, so a year ago when you were asking market players, they were generally more optimistic than today,” he said.
“A lot of the communities that started recovering up to 5% of residential prices are now seeing a double dip, creating an uncertainty in the market,” Godchaux added.