According to Knight Frank, only Dubai and Buenos Aires show a steady decline in prices out of the 25 best cities for real estate investment, breaking out of the global trend
The publication Al Jazeera writes that the steady oversupply of real estate under construction, which has persisted for the past five years, continues to restrain prices for luxury real estate at a relatively low level.
Having survived the turbulence of 2020 and having recovered from the pandemic, developers are already going to build about 62,000 new objects this year, and about 63,500 objects in 2022, according to information provided by the consulting company Knight Frank. The last time higher rates of construction were established only in 2009.
Faisal Durrani, head of Middle East research at Knight Frank, explains “Since the Great Recession of 2008-2009, the supply and demand imbalance was a key feature of Dubai's construction sector and, in the next few years, the trend is likely to continue.”
The relatively positive situation with the pandemic and rather restrained restrictive measures attracted a large number of wealthy foreign investors and expatriates to Dubai earlier this year, which certainly stimulated demand. However, this demand turned out to be uneven, and most of the real estate is still oversupplied.
The situation is aggravated by the fact that the pandemic interrupted the migration chains of the working population, and also led to the loss of jobs inside Dubai, which is why a lot of foreign citizens left the emirate, further reducing the demand for buying and renting residential real estate.
Nevertheless, if we consider the possibility of an increase in demand and prices in the next few years, it already makes sense for large investors to buy cheaper housing with the expectation of resale in the future.
According to Knight Frank, today you can buy 165 square meters of space for $1 million in Dubai, which is about five times more than in London or New York. At the moment, there are 42,356 houses worth about $ 1 million in the emirate. This number is second only to the capital of the United Kingdom.
The price of luxury residential real estate worth about $ 1 million is expected to decrease by 2% in 2021, adding to a decrease of 6% in 2020.
According to Durrani, the price of residential real estate in general should fall by 2-3%, the price of villas – by 3-4%. However, it is noted that the rate of price reduction may slow down in the next year or two, if restrictions on movement between countries are further eased. In addition, the growth in demand may affect the Expo 2020 postponed for the end of this year.