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Dubai’s housing crisis

This week Bloomberg reported that Dubai is facing a “housing disaster” as a result of overbuilding. There’s simply too much supply coming onto the market. About 30,000 units are expected to be completed this year, which the industry believes is about 2x actual demand. As a result, the industry — yes, the development industry — is calling for a 1-2 year pause on all new construction in the city so that the excess units can be absorbed and demand can catch up.

I’m not an expert on the Dubai market. And I’ve only been to the city once. But my sense is that there are relatively few barriers to new supply, especially compared to markets like Toronto and San Francisco. And so it’s not surprising to hear that supply is and has been outstripping demand. According to Bloomberg, the market peaked about 5 years ago.

For the industry to call for a moratorium on new construction it must mean that there’s concern of a prolonged housing slump and perhaps even some sort of systemic collapse. But if the objective is more affordable housing, than you might argue that Dubai has been doing a pretty good job of that. Here is a global city with a “housing crisis” on the opposite end of the spectrum. So what is it that makes Dubai different than, say, London or San Francisco?

Photo by David Rodrigo on Unsplash

2 Comments

  1. Scott Baker

    This is very misleading. My brother-in-law lives in Dubai. Here’s what they do: they have a huge contingent of laborers who are not counted, are not citizens. They have to live in bunkhouses sharing a kitchen/bathroom with 40 people. They are not over-supplied with housing.
    Also, Dubai has no real civic infrastructure. It doesn’t rain often in the desert, but when it does, 1 and 2 floors get flooded. My brother-in-law has lost 3 cars that way, though insurance is quick to pay.
    Their hospitals have many sparkling new machines, but they don’t often work.
    There is no reliable bus system and no trains at all.
    And so on.
    Housing is plentiful for those who can afford it, but you’re on your own for most services and floods have to be insured against, pretty much like everywhere else.

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  2. Richard Witt

    Dubai has a relatively small population and the majority of housing is there to supply the expats who are there to build it, and foreign investors, who are often the landlords. Without continued construction the demand slows and creates a circular shrinking phenomenon. when I was there for the CTBUH conference this time last year there was a lot of discussion about shrinking population and rental rates falling below the cost paid for housing. Population growth was being measured by human waste volume – which is apparently a very reliable metric.

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