Singing Pig

it's just flabbergasting how much supply will come onto the market in dubai in the next 5 years. Especially supply of luxury apartments. It's not a market for me. I think the profits have been made already.

Properties may prove profitable but it seems like too much needless risk is required.

"I really can't see where the supply is going to come from that will reduce prices in the next five years. There just aren't enough master developments that will be ready," said Iseeb Rehman, managing director of Dubai-based property consultant Sherwoods.

He said units will come on stream at developments including Discovery Gardens, Dubai Marina and Jumeirah Lake Towers, but not in sufficient amounts to satisfy demand.

"Regional liquidity is strong and there is high immigration, while a weak dollar is attracting investment into a more regulated market," he said. "I can't see any real change in growth for the next seven years."

Offering a similar opinion, MEED's Dubai Real Estate Report 2007 says supply of residential properties will total approximately 175,000 new units by 2010.

But an estimated 181,000 units will be required by the end of the decade - an under-supply of 6,000 - suggesting that price appreciation will continue into the next decade.

 ps.The canal development will not be completed until 2025 so so.

Colliers have reported there is already occupancy weakness in residential luxury developments. What is going to happen when more and more developments are delivered. Delay of delivery is propping up the market at the moment and should see moderate growth continue in 2008 but I don't hold high hopes for the market from 2009. There will be too many developments hitting the market and what about new developments yet to be announced which will come on in the weeks months and years to come. That is new supply and lots of it.

Also, is it fair to look at total forecast supply compared to total forecast demand? It is pretty clear that most of the supply is at the luxury end and but will most of the demand in the secondary market be at the luxury end? I don't think so. I think behind the numbers you might see a shortgage of properties in the midrange or cheap sector (excess demand) and a massive excess of supply in the luxury end (glut of properties)

For better info have a look at ameinfo.com which discusses pros and cons of the property market. Even they seem to be quite bearish about growth prospects.

I think the real profits have been made already. I would not be looking to buy a new development which completes in two years time..especially luxury!

I think delay will continue to prop up the market for years to come yet. Units which are in the recent reports are calculated on completion dates of 2008/9 when actually those units will not be complete until 2011/12 (for example, ocean height, the torch, infinity tower) by which time population growth will also be much higher (800 people per day I read recently). Remember also that population growth may grow faster than a linear speed as desire to work & live in Dubai increases because of more interesting projects / liefstyles and better transport systems.

I agree however that you should now be cautious as to what you buy. I still beleive it is possible to make 80% - 100% capital growth in the next 2 - 3 years in Dubai with certain off-plan projects. No where else in the world will give this right now.

Also it was interesting to see the so called experts EFG-Hermes get it so wrong. 

In Dec 2006 they said:

EFG-Hermes propose two alternative scenarios:

1. Substantial delays and cancellations, leading to price falls of around 25%-30% within 2 years
2. No delays, so that the bulk of deliveries actually arrive in 2008.

“This scenario sees prices falling by significantly more than the 25-30% in Scenario One,” notes EFG-Hermes in a December 2006 report.

Then the same company report last month:

The report highlights that of the 57,000 residential units due for delivery this year, less than 20 per cent have come to the market.
And this could result into property prices rising between 10 and 15 per cent this year, and between five and 10 per cent next year

Also rents and prices are still rising currently, so the rental yield is consistent for most project still at around 10 - 12 %

Yellow_bird

Ive been studying the Dubai property market for a few months now and am thinking of taking the plunge this month. What you say seems to make sense. Have you done your due diligence and what do you think are good project to invest in - as its good to realize not everythng is good. I would say the market will still be strong for another couple of years.

Dawood

Yes, the market is more difficult now, you have to be wise in your choices. Before anything you bought would double in value in 2 years. A few quick pointers for now:

1. Anything close to the monorail stations or tram service will do well over the next 2-3 years. Would be careful about Dubailand properties as it seems Dubailand attractions are delayed.

2. For off-plan buy something that will complete within 2-3 years max.

3. Stick to 1 or 2 bedrooms. 3 bedrooms are harder to resale.

4. In my opinion stay away from Damac.

5. Check availability or for a distressed resale in the Torch off-plan in Dubai Marina. I bought at AED 980 per sq ft in here. Typical good location, marina price is now around AED 1500 per sq ft Rumour is a Saudi investor has bought the land in front for a new shopping mall and luxury lifestyle arcade will be going infront and running back from the phase 1 of the marina. (aka tallest block on the planet).

6. You may find a few underpriced or launch price distressed resales in MAG 218 tower close to the Torch as develpment has slowed right down due to lack of workers. This has been resolved but means 1.5 year delay.

7. Check around Burj Dubai old town area - although may have missed the boat on that one as prices seems to have rocketed last year.

8. If buying to rent out on short term holiday lets, be careful about property from EMAAR, the lease for those units prohibits short term rentals.

9. JLT office space is a good option.