PEOPLE PREPARED TO PAY MORE BECAUSE THERE IS A LACK OF STOCK, AND IT'S BECOMING A TREND
Dubai's property market is running low on inventory as buyers currently outnumber sellers in popular areas of the emirate.
A study by global real estate consultancy Colliers said that due to the consistently high numbers of buyers, the market has seen a transition into a seller’s market.
“The majority of participants in our survey agreed that currently the quantity of buyers registered outweighs the supply in popular areas within Dubai, as agents informed Colliers they are currently running low on inventory. It is thought that one of the reasons for this is the ‘need to sell’, with owners that had to liquidate their assets having already done so and the remaining owners impartial to sell, but depending on the right price,” Colliers said in its first-quarter report.
Since the establishment of the Dubai Supreme Committee for Real Estate Planning in September 2019, new project launches have slowed down substantially. Though supply of new units from previously-launched projects is still coming onstream, low property prices and interest rates are attracting buyers in good numbers.
According to Asteco, 34,000 apartments and villas were handed over in 2020.
“What we are increasingly seeing is people prepared to pay more because there is a lack of stock, and properties which are vacant on transfer rather than let are obtaining the largest premiums. This has led to bidding wars, gazumping and constant increasing owner demands. Ninety per cent of participants agreed that the current level of pricing and price increases have far outweighed expectation and some believe this sharp increase and demand is verging into uneasy territory,” said the survey.
It said unreasonable owners’ expectations and a still strong demand from buyers can cause a stalemate. This has also led to many investors looking at entering the market and overpaying.
“A staggering 80 per cent of participants also acknowledged that currently, many properties are being sold off market with the risk of advertising a property too high due to the increasing competition between agents trying to obtain inventory,” said the report.
Who buys, and why?
Colliers’ survey results revealed that 57 per cent saw an increase in investor activity and a further 70 per cent had noticed increased foreign investment into the market, with the three most popular nationalities being from Chinese, European and Indian investors.
“Many believe a key driver to the increase in market activity is the way in which the UAE has handled the global pandemic, this has given people a strong sense of security and remains a key influencer to the decision making process of wanting to buy. It is still agreed that the majority of buyers are financed in some way, with some higher end purchasers also taking a small proportion of finance,” it said.
In addition, the market is seeing an increasing number of tenants looking to invest in property for themselves as the rent / mortgage payment gap is still favourable to ownership.
Atif Rahman, director and partner of Danube Properties, as he had stated earlier, said there will never be a perfect equilibrium between demand and supply.
“There could be a temporary balance but largely, either the supply or demand would be on the higher side. This is what leads to inflation or deflation in the real estate value. I want to reiterate that the risk of oversupply looms in every market across the globe, however, there will never be oversupply of good properties,” Rahman said.
“In the current situation, we do see a reasonable spike in the demand which will be good enough to consume the current supply of the real estate in the Dubai real estate market.”