It may be time to buy in Dubai with the emirate’s population on course to double in a decade.
The upbeat growth prediction from Bank of America Merrill Lynch challenges the widely held belief that overdevelopment during the emirate’s boom years would continue to dampen demand for new homes.
“Dubai’s status as a regional financial, transport and logistics hub places it in a position to benefit from growth in neighbouring countries in a self-sustaining fashion,” said Jean-Michel Saliba, the regional economist for the bank.
The report identifies Dubai as one of the best GCC cities in which to develop business. With a current working population of 1.3 million, the emirate aims to create 950,000 new jobs by 2020, with retail, tourism and related sectors fuelling growth.
It estimates that the emirate’s active population should grow by 6.1 per cent on average over the next eight years – outpacing the increase in residential supply, which is predicted to grow by 4.9 per cent over the next two years. That means an incremental housing demand of 317,000 units is possible in Dubai by the end of the decade - or about 94 per cent of total current housing stock.
About 3,000 new units were completed in Dubai in the second quarter of this year, taking total residential stock to 344,000 units, according to Jones Lang LaSalle. Developers expect to deliver an additional 24,000 new homes in the second half of this year.
The delivery of thousands of new villas and apartments sold at the peak of the market in 2008 has dented investor confidence in a property market recovery despite the emergence of positive pricing increases in some locations.
But the rapid growth of traffic through Dubai’s airports and a sharp rise in hotel occupancy and the numbers of people shopping points to a more upbeat economic forecast. Dubai hotel guests are expected to rise by 1.6 million to reach six million by 2020. That would require 18,868 new rooms.
Retail space is also expected to achieve growth of 5 per cent until 2020, outpacing the completion of new retail space that is expected to grow by 4.4 per cent.
The bank said Dubai’s bid to diversify its economy had helped it to deliver infrastructure assets faster than its neighbours while also building a non-oil economy more geared towards trade and tourism.
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