The real estate market in Dubai is facing a period of transition as prices have hit lows not seen since 2015. For decades, Dubai developers operated under the assumption that whatever they built would sell, but rising supply and falling prices mean this may no longer be the case. While government efforts like privatizing state firms and cutting fees aim to stimulate growth, the real estate sector continues to suffer with layoffs. Some experts warn against investing until Dubai experiences a deeper slump when oversupplied new projects hit the market. However, others believe the oversupply issue has been overstated, and that addressing the needs of Dubai's growing middle class by providing more affordable housing could help rebalance the market.

1. Dubai’s Real Estate Market Faces
a Period of Strategic Transition
Dr. Ehsan Bayat

2. Dubai’s Real Estate Market Faces a Period of Strategic Transition
 The Dubai real estate market may be facing a period of transition as prices hit lows not seen since
2015. For a long time, Dubai developers have operated under the assumption that whatever they build
will sell, but this may not prove true in the future.
 For the past several decades, Dubai developers have worked diligently to create a city unlike any other
in the world. Dubai has transformed into a desert oasis with world-class amenities and some of the
most luxurious homes available anywhere. These offerings have attracted wealth from around the
globe, but this stream seems to be dwindling.
 Some developers in Dubai continue to reach for landmark achievements. For example, Dubai Creek
Tower is now set to be taller than the Burj Khalifa when it is completed. However, construction on the
building started more than two years ago, but not much more than a foundation has been completed
and no date for delivery has been set. Dozens of cranes still dot the Dubai skyline, but many sit idle.
Projects across the city have been halted as property prices continue to decline, which means that
developers are starting to default on payments to suppliers.

3. Dubai’s Government Solutions Fall Short on Driving Growth
 Government officials in Dubai recognize that there is a real problem brewing. While the “build it and
they will come” approach helped establish Dubai as a regional economic hub, this philosophy will not
necessarily lead to further progress for the city.
 Starting last year, Sheikh Mohammed bin Rashid al-Maktoum began meeting with consultants about
how to spark additional growth in Dubai. Some of the conversations centered on privatizing state-
owned organizations to revive capital markets and cutting fees to stimulate more business growth. The
executive council in Dubai even hired PwC to begin creating new policies around these conversations.
 Whether these solutions are coming too late or haven’t yet made their full impact, the real estate
sector in Dubai is suffering. In March, two of the leading real estate developers in Dubai cut many jobs
in an effort to consolidate operations in light of the downturn. Nakheel, which is controlled by the
state, dismissed hundreds of employees shortly after S&P Global Ratings predicted prices to fall an
additional 10 percent over the course of 2019. A privately held company, Majid Al Futtaim Properties,
also fired more than 100 employees.

4. Market Predictions Remain Mostly Bleak for Dubai
 Dubai has worked to attract foreign investors to the city with new rules for company ownership and
citizenship that encourage people to purchase more property and make long-term investments.
However, these efforts have not fully paid off and may be further discouraged by a recent statement
from investor Mark Mobius.
 Mobius warned people not to invest in Dubai until it experiences its “real slump,” which he believes will
happen when the many new projects under development finally hit the market. This oversaturation, he
says, will result in even further property devaluation. He also pointed to Dubai’s strict immigration
policies as an enduring problem, indicating that the steps taken by the emirate’s officials are not
enough.
 Some market professionals point to a slight uptick in sales since the beginning of 2019 as a point of
hope for the future of the market, but these numbers may not reflect a true recovery. The uptick in
sales has not led to an increase in market prices. On the contrary, the increase in sales may directly
relate to falling prices and people taking advantage of the market.

5. Addressing the Real Oversupply Issue in Dubai
 Despite these signs, some experts believe that the oversupply issues have been overemphasized. For several years,
every new quarter in the city has begun with analysts predicting oversupply, but this massive dumping of properties
on the market has not yet occurred. Furthermore, Expo 2020 will help absorb many of the projects currently under
development. This event is projected to boost the GDP by more than 3.5 percent and bring more than 25 million
visitors over the course of six months. Even beyond this global event, there is real demand for property in the
emirate. These experts say that the real question developers should ask is if the current supply reflects this demand.
 In other words, Dubai has largely focused solely on the needs of wealthy individuals who can afford its luxury
penthouses and villas. However, the city has a growing middle class that would like to graduate from rentals and
purchase their own homes. Within the Dubai market, cheaper properties are not readily available, and this dearth
could be contributing to the market slump.
 If developers start addressing the needs of all Dubai residents and not just those who can afford luxury properties,
the market might rebound. This argument pushes against the “build it and they will come” attitude that developers in
Dubai have largely held and challenges them to instead build for the people who are already there.