Property

Damac: Short supply to boost Dubai market

Developer says fewer than 10,000 units will be delivered this year

PHOTO: The rapid growth in Dubai property prices witnessed in 2012-2014 “is now behind us” said Damac chairman Hussain Sajwani. Credit: Damac

A shortage in supply of new homes is set to boost the Dubai property market in 2016, with fewer than 10,000 units set to be delivered, according to developer Damac.

The market is likely to be resilient this year despite the “challenging economic environment”, Damac Properties chairman Hussain Sajwani said in a statement announcing the company’s 2015 results.

“We see the structural shortage of supply as the cornerstone of the market resilience,” said Sajwani. “We expect the total supply in Dubai to again fall short of 10,000 new units in 2016 eventually driving the market back into positive pricing growth territory, perhaps towards the second half of the year or early 2017.”

Damac in October lashed out at real estate consultancies, which it accused of over-estimating the number of homes that would be handed over in Dubai, something it said was damaging to market sentiment.

The consultancy JLL had earlier forecast that 25,000 homes would be completed in 2015. But Damac said less than a third of that number had actually been delivered across the market as a whole.

“2015 ended with supply not exceeding 8,000 units for the Dubai market, a massive reduction on the initial 25,000 units supply speculation,” said Sajwani.

The Dubai Financial Market-listed Damac said in a statement that its net profit grew by 30% to AED 4.51 billion ($1.23 billion) in 2015, with revenues of AED 8.54 billion ($2.32 billion).

The company said it completed a total of 2,600 units in 2015, with its first project in Qatar seeing 512 units delivered.

Sajwani acknowledged that the rapid growth in Dubai property prices was a thing of the past.

“The Dubai real estate market is at a consolidation point in the cycle and the rapid growth witnessed in 2012-2014 is now behind us,” he said.

“Regarding market sentiment, the oil price dynamic is certainly a factor, but one should always remember that a falling oil price creates as well as erodes wealth.”

“We strongly believe that the current environment is very different than the one we faced in 2008. Dubai, in terms of government, regulator, developers, providers of capital, both debt and equity and investors have learned a great deal. The underlying fundamental drivers that make Dubai an attractive destination have not changed.”

“Importantly for the real estate market, a high single digit rental yield, amongst the healthiest in any major metropolitan centers globally, should continue to support investment demand.”

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