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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
Today I'm excited to announce that the Junction House Sales Gallery has just received a
Berlin just approved a five year "rent freeze" on apartments in the German capital. The rent caps will be implemented on January 1, 2020, but will apply retroactively to all rental agreements from June 18, 2019 onward (which is when the decision was made). It is estimated that this new law will apply to some 1.5 million apartments.
The move is in response to rapidly rising apartment rents, which grew about 12% in 2017 alone. So I can appreciate where this is coming from.
From what I have read, it will not apply to new construction, which is the first thing I checked when I saw the decision. That would have almost certainly choked off any new apartment construction in the city. With a capped top line, it wouldn't take long for costs to increase and make new rental construction infeasible.
That said, a similar squeeze is liable to happen for existing buildings. It is one thing to cap rents (revenue), but what about utility, maintenance, labor, and other operating costs (expenses)? As costs rise and operating margins tighten, it can become exceedingly difficult to reinvest in, or even maintain, an apartment building.
For more on the announcement, here's an article from FT.
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
Today I'm excited to announce that the Junction House Sales Gallery has just received a
Berlin just approved a five year "rent freeze" on apartments in the German capital. The rent caps will be implemented on January 1, 2020, but will apply retroactively to all rental agreements from June 18, 2019 onward (which is when the decision was made). It is estimated that this new law will apply to some 1.5 million apartments.
The move is in response to rapidly rising apartment rents, which grew about 12% in 2017 alone. So I can appreciate where this is coming from.
From what I have read, it will not apply to new construction, which is the first thing I checked when I saw the decision. That would have almost certainly choked off any new apartment construction in the city. With a capped top line, it wouldn't take long for costs to increase and make new rental construction infeasible.
That said, a similar squeeze is liable to happen for existing buildings. It is one thing to cap rents (revenue), but what about utility, maintenance, labor, and other operating costs (expenses)? As costs rise and operating margins tighten, it can become exceedingly difficult to reinvest in, or even maintain, an apartment building.
For more on the announcement, here's an article from FT.
Some of you may also not be aware that before we converted the above studio into a condo showroom, we donated it to a number of creative groups who were looking for space, but maybe didn't have a lot of (or any) money. Lost & Gone used it to host an immersive rendition of Romeo & Juliet (video of the performance, here). DJ and designer Steve Aoki used it to launch one of his Dim Mak collections (okay, he has a lot of money). And Secret Walls used it for a live art battle. In fact, Secret Wall's markings are still present within the Gallery if you look up toward the ceiling.
Before we came along, the space was used as an art studio. That's an important part of the Junction House story and we wanted to commemorate that in the build out of the Sales Gallery (the "Gallery" part is meant to reference this past use). It is also one of the reasons why we partnered with Ben Johnston for this "Forever" mural on the outside of the building (yes, we see the irony); why we created a place for artists to showcase their work (currently Leeay Aikawa); and why we commissioned a celebrated local artist (Thrush Holmes) to create a custom piece for the future lobby of Junction House.
Art matters.
Some of you may also not be aware that before we converted the above studio into a condo showroom, we donated it to a number of creative groups who were looking for space, but maybe didn't have a lot of (or any) money. Lost & Gone used it to host an immersive rendition of Romeo & Juliet (video of the performance, here). DJ and designer Steve Aoki used it to launch one of his Dim Mak collections (okay, he has a lot of money). And Secret Walls used it for a live art battle. In fact, Secret Wall's markings are still present within the Gallery if you look up toward the ceiling.
Before we came along, the space was used as an art studio. That's an important part of the Junction House story and we wanted to commemorate that in the build out of the Sales Gallery (the "Gallery" part is meant to reference this past use). It is also one of the reasons why we partnered with Ben Johnston for this "Forever" mural on the outside of the building (yes, we see the irony); why we created a place for artists to showcase their work (currently Leeay Aikawa); and why we commissioned a celebrated local artist (Thrush Holmes) to create a custom piece for the future lobby of Junction House.
Art matters.
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