Dubai is not only investing in oil, but it aims to strengthening its real estate market as well. However, it has been seen that Dubai is struggling with keeping the momentum going. According to globalpropertyguide.com, "After the unsustainable growth surge of the last two years, Dubai's housing market is now slowing sharply, and the same is true in Abu Dhabi."
Among the affected real estate industry are the residential ones. According to the latest data reported by propertywire.com, "Residential real estate prices in Dubai continued to fall in the first six weeks of the second quarter of this year in comparison to the first three months of 2015."
Although the property prices are falling, all is not lost in Dubai and the mid quarter research report from Phidar Advisory supports the view that the "The ongoing erosion of sale prices is a healthy correction."
It is undeniable that there is a decrease in apartment leases. Statistics have shown that the sale prices decreased by 1.5 percent, and the lease rates for villas decreased by 0.6 percent. The yields in sales have also decreased by 2.9 percent. There are many factors as to the reduction of sales in properties and, according to a report by propertywire.com, "The report references, income specific supply-demand imbalances." Other reasons are directed to the susceptible segment in the housing supply with its existing annual rents of AED100, 000 to AED160, 000 per year."
The market has shown tremendous challenges in regards to supply and demand. According to the analysis by Down, "If we consider only under construction and launched projects, the majority of the development pipeline is justified due to sufficient total demand." The supply in the middle high income portion has also increased the possibility of competition which affects the overall real estate market. There is a need for Dubai to implement supply reconstruction.
If Dubai will not address the overflowing supply, it will lead into total market disequilibrium and according to propertywire.com, "If current announcements convert into launches, the probability for instability by 2020 will increase significantly."