12 May 2016

Dubai: The War of the Villas

Historically apartments have made up 84% of the supply, dominating the housing market. However, due to the lack of supply superior villas had superior price growths in the first Bull Run from 2002 to 2007.This caused developers to concentrate on launching villas during the second rally in 2012, increasing the ratio of upcoming supply.

The majority of developments have been clustered around the Sheikh Zayed road corridor. However, as developers began to launch the second wave of launches in 2013, they shifted westwards, towards Al-Khail and Al-Qudra road.

A breakdown of the pricing structure of the horizontal market (mansion, villas and townhouses) in 2005 reveals that 85% of units in freehold areas were below the 2 million mark. This dynamic has inverted a decade later in 2016, as these units only accounts for 12% of freehold supply.

The pendulum appears to have shifted somewhat with recent launches by developers catering to the below aed 2 million mark on a greater scale (moving up from 12% to 32%); this is a trend that we opine will continue as developers increasingly cater to the mid-market segment by developing in new upcoming suburban areas.

Currently the existing supply is skewed towards the villa segment accounting for 63% of the housing stock. However, in the second wave of development from 2012, developers began to launch affordable options in order to cater to the pent up demand. This lead to a series of new townhouses launches, which accounted for 50% of the new supply.

To download the full report click here: http://blog.reidin.com/PublicReports/UAE160513.pdf