A supply glut that has held down Dubai's property prices for over half a decade will likely keep it on the sidelines of a global upswing in values of prime residential real estate.
Fast emerging from the pandemic slump, the construction industry will deliver an estimated 62,000 homes in the emirate this year and nearly 63,500 in 2022, which would be the most since 2009, according to consultancy firm Knight Frank.
The burst of supply will probably leave Dubai, alongside Buenos Aires, as the only two cities in Knight Frank's selection of 25 prime locations to witness a decline in values for their top-end residential properties.
"The supply-demand imbalance has been a defining feature of Dubai's residential market ever since the Great Recession of 2008-09," said Faisal Durrani, head of Middle East Research at Knight Frank.
"Looking at the next few years, this looks set to persist."
While the wealthiest home buyers who fled virus lockdowns for Dubai helped spur demand for luxury homes earlier this year, the improvement hasn't been uniform.
Much of the city's real estate is still working through an oversupply that drove down values by over a third since 2014.
The pandemic compounded the pressures from job losses and departures of foreign workers, chipping away at demand for rentals. The booming residential pipeline suggests that chronic oversupply will remain a key vulnerability for Dubai.
Still, the outlook also means that Dubai will be a relative bargain for buyers with deep pockets. A U$1 million (HK$7.8 million) budget can buy 1,776 sq ft of space - around five times more than in London or New York. Dubai has 42,356 homes valued at US$1 million, second only to the UK capital.
Home prices overall are set to fall 2 to 3 percent while single-family properties - known locally as villas and making up about a third of the city's residential supply - are likely to climb 3 to 4 percent, Durrani said.
