Construction in Dubai, and its Effect on Property Prices
With construction still rife in Dubai, there certainly seems to be a substantial increase in the supply of property. You would expect that demand would closely match this, as in recent years there has been a steady annual population growth of around 6%.
Unfortunately, demand isn’t following suit – causing a large decrease in house prices. In May 2016, Dubai’s residential property price index (RPPI) fell by 5.35%. Adjusted for inflation, this fall in property price amounts to a huge 6.86%.
Dubai is most likely over-shooting demand, with 4,333 buildings completed since the beginning of 2017. Out of these, close to 4,000 are villas and 173 are multi-storey buildings.
It is clear to see that there is a lot of money still being pumped into the property market. However, this overspending can perhaps be justified by the upcoming Expo 2020. Although the demand may not be there at the moment, a lot of the current construction is in preparation for this monumental event.
An injection of Dh143bn will be pumped into the economy, aiming to support the huge influx of visitors. This is funding developments such as the Bluewater Island, the Creek Tower (Dubai’s next escapade to build the world’s tallest building), and the upcoming Dubai Harbour.
We can certainly expect to see the first two developments completed in time for Expo 2020, with construction already well under way.
Since 2016, the property market has stabilised a little, and is expected to rise closer to 2020. Foreign investment is also expected to increase confidence in the property market, and lead to price rises even after the exhibition has ended.
Another factor that could lead to a further increase in the value of property in the emirate is the Dubai Harbour. It is expected to act as a magnet for wealth and investment due to its attractiveness to yacht owners. Unfortunately, the completion date for the project has not been released, and so it is something that we can simply look forward to in the near future.