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Dubai developers adjust supply pipeline

Posted by Irish Manluctao on July 13, 2016
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Image Credit: Supplied

Units released during first half totals 5,500 homes and on par with 2015 second half tally

Image Credit: Supplied

Dubai: There will be no oversupply of off-plan properties in Dubai — the city’s developers have made sure of that. Launches in the first-half of the year will only create a further 5,500 units, which is equal to what the market saw in the second-half of 2015.

In comparison, the first-half of 2015 saw the release of 12,000 plus units, and which followed the 35,000 units launched as off-plan during the whole of 2014.

The phased approach towards launches since third quarter 2015 has gone some way ensuring that Dubai’s realty will not be burdened by a high inventory of unsold properties between now and 2020-21. Master-developers such as Dubai Properties have in the recent past repeatedly emphasised that new launches will be dictated strictly by market sentiments swirling about at the time. No more … and no less.

What the grip on supply does is stabilise prices, or at the very least slow down the rate of decline in a soft market. That the price decline for Dubai’s properties has slowed down considerably in the last two quarters could be attributed to the fewer supply being put to market.

But will stabilisation of supply — and to an extent prices — mean developers could be induced to pick up the pace of launches in the second-half?

“The pace of off-plan launches are still greater than they were in 2011-12 and given the expected pipeline along with the sales incentives (on recent releases), we anticipate that the overall number of units launched in 2016 will equal if not exceed the levels of 2015,” said Sameer Lakhani, Managing Director of Global Capital Partners. “We have seen the payment plans have had some effect in stimulating demand.

“It is this as well as factors such as higher oil prices and a somewhat weaker dollar in recent months that we expect the pipeline of launches to accelerate in the second-half.”

In the first-half of this year, private developers have matched their government-owned peers in the number of units released during this period.

There was Nshama continuing with its regular launches at its Town Square development, the Sobha Group did so at MBR (Mohammad Bin Rashid) City, and Damac had Akoya and Aykon City. Aykon City will overlook the Dubai Canal and has a project sales value of Dh7.4 billion and a completion date in 2021.

Damac last week released units at its first residential tower there — a 60-storey structure with two-bedroom apartments from Dh1.69 million. The earlier releases were hotel apartments at the other high-rises in the cluster.

“Our investors and the community expressed interest to purchase units when the project was first launched,” said Ziad El Chaar, Managing Director, Damac Properties.

According to Lakhani, “We witness that there has been an increase in private sector masterplanned communities as well as private sector developers offering alternatives at either end of the pricing spectrum.

“The post-handover payment plans were first offered by private sector developers, and only later were adopted by government developers. There is ample evidence to suggest that the private sector is accelerating the pace of launches.

“What will be interesting to note is how the developments actually enter the marketplace, as with the larger ones there lies the flexibility to delay handovers based on demand conditions that are soft.

“It is likely the pace of deliveries will ebb and flow based on demand dynamics. However, what the data is suggesting is that the private sector remains innovative with their launches (in price and payment plans) and this trend is likely to continue, even as government owned developers move towards more signature developments.”

According to estimates, government-owned developers were behind 56 per cent of new homes announced between 2012-15. But the balance could shift in favour of private developers by the end of the decade, by accounting for as high as 70 per cent of projected supply by 2020-22. This will be driven by activity centred in and around the Dubai South master-development, where a serious pick-up in new project activity could kick off by 2018 and thereafter.


Private developers to pick up pace

• Of the delivered residential units in Dubai, Emaar and Nakheel are behind 44 per cent of these, according to estimates by Global Capital Partners. Going forward, private developers could pick up the baton with Damac contributing a sizeable of the projected supply pipeline. The company has over 40,000 units in the development portfolio, according to GCP.

• It is not just the demand and supply equation that will have a bearing on upcoming launches. Even the latest accounting norms will. “There has been a positive impact of anywhere between 15-40 per cent in the bottom line as a result of the IFRS accounting change,” said Sameer Lakhani of GCP. “For this earnings trajectory to sustain, the pace of off-plan launches needs to sustain and even accelerate. It is this variable that we are witnessing leading to the increased anticipated pace of launches in the second-half of the year.”

SOURCE:Gulf News