Dubai will face housing shortage despite Dh62b worth of supply

Dubai: Dubai's housing market will see Dh62 billion worth of property supply next year, but the demand for accommodation will far outstrip availability, housing finance firm Tamweel said yesterday.

The shortage of new homes is particularly severe for buyers whose monthly income is less than Dh12,000, while in the luxury and top-end category the supply-demand gap is the narrowest.

This year the shortfall is about 20,000 residential units worth about Dh34 billion in aggregate value, Tamweel chief executive officer Adel Al Shirawi said.

"Next year we are expecting about 50,000 units of supply against a demand of 54,000 units. But with last year's unmet demand there will be a shortage of 24,000 units. Supply is not catching up with demand," he said.

Tamweel estimates 50,893 units worth about Dh62 billion will come onto the market in 2008, while the expected supply in 2009 with be 50,257 units worth about Dh87 billion.

Distortion

The market is experiencing a distortion in most segments.

A Tamweel analysis found that 49 per cent of housing demand came from the low-income bracket but this category of buyers had just 15.4 cent share of new supplies.

These buyers seek residential units costing less than Dh500,000. Due to the vast supply-demand gap, housing rents and prices for this category are expected to go up.

"Prices will stabilise in the next three years," Al Shirawi said.

Top-end units, which sell for more than Dh3 million, make up 26.9 per cent of supply against a demand of just nine per cent.

For buyers looking for units between Dh1 million and Dh3 million the supply-demand ratio is 26:20.

Middle-income buyers, who look for residential units between Dh500,000 and Dh1 million, the supplies of units were 31 per cent of the total against a demand of 23 per cent.

Al Shirawi said developers need to build more houses at prices below Dh500,000.