Some areas of Dubai are experiencing a shortage of smaller units due to massive demand due to increasing population and insufficient supply of new units in those areas.
Real estate industry executives say that Old Dubai areas such as Bur Dubai and Deira are facing a shortage because not many new projects have come up due to the unavailability of development areas in those localities, which fails to meet demand amid the rapidly -growing population in the emirate.
Dubai’s population grew by more than 100,000 last year and by more than 176,000 in the past two years, driven mainly by the influx of expatriate workers, professionals and foreign investors to the emirate. Meanwhile, the number of new units delivered in recent years is far less than population growth, resulting in a shortage of smaller rental units.
Real estate consultancy Asteco’s quarterly report showed that Dubai’s old and affordable areas also witnessed a double-digit increase in apartment rentals in the third quarter of 2023, rising up to 23 percent compared to the same quarter of the year past.
Furthermore, New Dubai areas offer the advantage of owning properties in freehold areas, generating greater demand for new units and attracting developers to launch more projects in the new and upcoming areas.
Industry executives say there is enough supply in New Dubai areas for smaller units to meet growing demand from the population, which is estimated to reach almost 6 million by 2040.
Focus on high-end developments
“Old Dubai is facing a shortage of smaller units, with larger, more spacious apartments built 20 to 35 years ago. During that period, Dubai’s population was significantly smaller and mainly made up of families with several children. Consequently , private owners developed remarkably spacious apartments with multiple rooms to meet the demands of residents and citizens. For example, most two-bedroom units include an additional room for a helper, along with spacious laundry and storage rooms, without mention private bathrooms for each room,” said Svetlana Vasilieva, secondary market sales director at Metropolitan Homes.
Alan James Gammon, chief operating officer at ACE Luxury Property, said there are several reasons for this shortage, including population growth, increased demand for small living areas and a focus on building high-end property developments rather than affordable housing options.
Gammon added that demand for established older communities in Dubai remains high, particularly in Bur Dubai and Deira, where there is limited capacity for new construction.
“While the cultural richness of old Dubai increases its appeal, the shortage of space makes it difficult to make smaller homes and additional services available. Therefore, many new residents in old areas have to live in sublet and shared apartments.”
Gammon added that New Dubai, characterized by its contemporary residential and commercial projects, extensive land area and luxurious residences, offers a greater offering of studios and one-bedroom units. “The lure of a modern lifestyle, coupled with state-of-the-art infrastructure and amenities, is attracting residents to New Dubai, potentially creating shortages in these highly sought-after areas. But the New Dubai lifestyle comes at a premium price. a little higher.”
In recent years, as Dubai’s property market continued to boom, Lewis Allsopp, chairman of Allsopp & Allsopp, said the market also saw a rise in luxury, ultra-luxury and branded residences. Since then, the market has also seen limited availability of affordable housing and smaller units.
Allsopp added that prime areas such as Marina, JBR and JLT record a higher percentage of sales and rentals of smaller apartments, which range between 27 and 48 percent annually compared to Old Dubai, where it ranges between 8 and 9 percent.
“The possible reasons behind this shortage relate to how in Old Dubai, most locals can buy properties while residents can only rent, but since no new units are built there, the supply is less compared to the New Dubai While, in New Dubai, there is “There is a drastic demand for properties, so developers are working around the clock to meet this demand by developing newer projects at that end of the city” , he added.
Svetlana Vasilieva of Metropolitan Homes said areas such as Al Barsha, Jumeirah Beach Residence (JBR), Jumeirah Lake Towers (JLT) and Dubai Marina have a higher number of studio and one-bedroom units compared to Old Dubai.
“This meets the diverse needs of different customer groups, including young professionals coming to Dubai to start their careers,” Vasilieva added.
He explained that Dubai Marina, JLT, Jumeirah Village Circle (JVC), The Greens, The Views, Business Bay and Downtown have a significant number of 1-bedroom units ready to move into, with studios being less common. “However, the development trend has changed in recent years, with developers focusing more on townhouses and villas,” Vasilieva added.
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