Are there two different markets for Dubai Property?
The pressure on rental prices and cost of houses would be mounting till the supply of completed property in Dubai falls short of demand from arriving as well as existing residents. The reasons for supply shortage also include the contractors who have fallen short of their supply schedules.
The supply chain conditions in general have an absurd view due to flexible delivery dates penned into sales agreements for off-plan buyers. Therefore it makes it hard to predict when the supply of property will catch up with its demand.
Adel Al Shirawi the CEO of Tamweel laid out his plan for 30,000 unit completion for 2007 in front of cityscape conference last week. This forecast comfortably overlooks the demand for 5,000 households for new affluent arrivals per month suggested by immigration authorities. The Dubai property however is a two way market; one for existing completed properties and the other for undefined off-plan property development.
Although it seems simple to confuse them as similar, in reality they differ a lot from each other. The existing completed properties have an immediate value for the end-user as well they offer an income form rent. However the off-plan property is more of a capital investment for buyers. Unless this property can be quickly sold out it is like dead money for the buyers. The developers at cityscape projects confirm these as huge development where an early investor purchases 50 units and earns a good profit from re-sale after two months. However it is a worst kind of speculation where buying takes place based on assumptions in a risk governed market and buyers have no intention to pay more than a deposit.
Weakness can perhaps emerge in off-plan market of Dubai Property with market running out of buyers for ‘off-plan’ units, even before market runs short of completed units of property.
How to save the existing house owners?
The weakness in the market can surely come to the rescue for existing property market, putting a cap on the new supply, whereas, the demand remains strong for completed units.
Further, if the off-plan market is not affected by the speculative correction, the natural forces of construction delays would still be there with contractors having tough time finding building material costs rising to unimaginable levels.
A huge expansion plan is being mobilized for Abu Dhabi’s real estate sector calling scarce human and physical resources. Here the off-plan developers would soon find themselves in midst of deep trouble due to the prevalent scarcity.
It just might mean that the Dubai property could rebalance itself without a crash in existing prices for completed property owners. Dubai has proved the doubters wrong on many occasions.
The supply chain conditions in general have an absurd view due to flexible delivery dates penned into sales agreements for off-plan buyers. Therefore it makes it hard to predict when the supply of property will catch up with its demand.
Adel Al Shirawi the CEO of Tamweel laid out his plan for 30,000 unit completion for 2007 in front of cityscape conference last week. This forecast comfortably overlooks the demand for 5,000 households for new affluent arrivals per month suggested by immigration authorities. The Dubai property however is a two way market; one for existing completed properties and the other for undefined off-plan property development.
Although it seems simple to confuse them as similar, in reality they differ a lot from each other. The existing completed properties have an immediate value for the end-user as well they offer an income form rent. However the off-plan property is more of a capital investment for buyers. Unless this property can be quickly sold out it is like dead money for the buyers. The developers at cityscape projects confirm these as huge development where an early investor purchases 50 units and earns a good profit from re-sale after two months. However it is a worst kind of speculation where buying takes place based on assumptions in a risk governed market and buyers have no intention to pay more than a deposit.
Weakness can perhaps emerge in off-plan market of Dubai Property with market running out of buyers for ‘off-plan’ units, even before market runs short of completed units of property.
How to save the existing house owners?
The weakness in the market can surely come to the rescue for existing property market, putting a cap on the new supply, whereas, the demand remains strong for completed units.
Further, if the off-plan market is not affected by the speculative correction, the natural forces of construction delays would still be there with contractors having tough time finding building material costs rising to unimaginable levels.
A huge expansion plan is being mobilized for Abu Dhabi’s real estate sector calling scarce human and physical resources. Here the off-plan developers would soon find themselves in midst of deep trouble due to the prevalent scarcity.
It just might mean that the Dubai property could rebalance itself without a crash in existing prices for completed property owners. Dubai has proved the doubters wrong on many occasions.
posted by Property Reporter at
10:55 PM
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