The UAE property market will achieve a demand and supply equilibrium in 2010-2011 as high supply of properties is expected in the coming years, according to a new report.
"The real estate market has witnessed a significant growth over the past five years due several drivers at the micro and macro economic levels. However, we believe prices of real estate products will continue to grow in the coming years due to high demand from expatriates and increase in labour costs and construction materials," said Bilal A Kanbar, Business Line Manager, ImpaQta.
The property report, which was released yesterday by Saudi-based management advisory services company and Great Properties, a Dubai-based real estate sales and marketing agency, said the real estate boom in the UAE is set to hit a major roadblock that could seriously affect the completion of projects across the emirates.
"The real estate market has been persuaded towards an investors' market and not a buyers' market. This has resulted in highly inflated real estate prices. Developers find themselves facing higher construction costs and delayed project completion dates."
According to the report, one of the major problem lies with ready-mix concrete suppliers as representatives of these suppliers are struggling with a huge backlog of orders due to the massive shortage in cement supply. Moreover, steel and cement prices have jumped 70 and 50 per cent, respectively, in 2007. Labour is another key issue for contractors as rents of camps have increased over the past two years and as a result costs have increased by up to three times over the past year.
The report further says that delay in the delivery of new properties has led to further appreciation in rents and prices as they have increased by 40 to 50 per cent over the past few years in Dubai.
"Most of the projects are still under construction and the next wave of supply is expected in the year 2010, which is expected to drive stabilisation in property prices," Kanbar said.