Friday, September 15, 2006

Luxury home demand and supply mismatch feared

Serious concerns have emerged over a "mis-match" in supply and demand for top-tier Dubai property.

A potential lack of investors able to finance mortgage payments of approximately Dh18,000 a month for up-coming luxury properties in Dubai could create an over-supply in the higher-tier market, property market insiders say.

On the other hand, quality developers are continuing to overlook the provision of properties aimed at mid- income earners, they say.

"There seems to be a lot of property which is coming on line in the next two years in the high end of the market, where prices average Dh900 per square feet. In the waterfront area alone you will not find anything less than Dh1,000 per square foot," said Khalid Nazir, head of investment banking at Abu Dhabi Islamic Bank.

Nazir said if demographic predictions are to be believed, these prices will be out of reach for most UAE residents, creating a mis-match between supply and demand in the high-end real estate sector.

"When you work out a 25-year mortgage on an average flat in this sector, the payments would be around Dh18,000 a month. There are many international and regional investors who would be able to pay that sort of money, but will all the supply be taken by them I doubt it," he said.

However, at the other end of the property spectrum, Nazir said the supply of mid- to low-tier housing will fail to meet demand in two years when the UAE develops its manufacturing and boosts employment.

Speaking to delegates at yesterday's opening day of the Real Estate Investment World Middle East conference, Khalid Al Mashaan, chairman and managing director of Alagarn International Real Estate Company in Kuwait, said the GCC's mid-income housing sector is being overlooked by "professional" developers.

"There is a big market out there for property aimed at mid-income families, but not enough attention is being paid to it," he said.

"At this stage, what we are seeing is local players in the market, and local players are providing the same model over and over again without looking at the needs of the market."

[Gulf News - September 19, 2006]

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