Correlation between Dubai's population and real estate market

Hello. This is ARAKO real estate, a Korean real estate company in Dubai. Recently, we have been receiving many inquiries from people about how long the rising real estate trend in Dubai will continue, mortgages, and how overseas investors can purchase them. In the future, we will discuss various topics related to Dubai real estate with Korean residents through this column.

One of the most frequently asked questions is why has the Dubai real estate market been so strong over the past two years.

1. There are more cars on the road, and the perception that rents have gone up

2. Even amid political instability in the Middle East, Dubai real estate continues to rise, so it is perceived as a safe asset and capital from neighboring countries is pouring in.

3. Chinese capital is moving from Singapore to Dubai due to tensions between China and Taiwan in the Asian region.

4. Tax benefits and Golden Visa policy offered by Dubai Government

There are various rumors and analyses. I will discuss this in the next column.

As a first topic, I would like to do a basic data analysis on Dubai's population growth, the current housing supply by the Dubai government, and the planned housing supply in the future.

Let's take a look at the table.

Year	(A) Population	(B) Change	(C) Increase	(D) Required Units	(E)House Supply
2019	3.33 M	6.14%	192,550	77,020	29,113
2020	3.40 M	2.30%	76,350	30,540	31,541
2021	3.45 M	1.39%	47,300	18,920	31,323
2022	3.53 M	2.37%	81,860	32,744	33,189
2023	3.63 M	2.73%	96,580	38,632	38,089
2024	3.78 M	4.25%	154,220	61,688	*24,000
2025	3.89 M	* 2.8%	105,840	42,336	*42,000
2026	4.10 M	* 2.8%	108,934	43,574	*48,000
2027	4.21 M	* 2.8%	114,800	45,920	*30,000
	Source: DXB interact / Google / Macrotrends	* estimated

(A+B+C) Dubai population trend: According to data from DXB interact released by the Dubai government, the population growth rate will be 2.73% in 2023 and 4.25% in 2024. There are also reports that it will recover to the pre-COVID-19 level of 5% from 2025, but we have conservatively estimated it to be around 2.8%, the 2023 level.

(D+E) This is the part that concerns me. Most agents say that there will be a lot of demand and a small supply for contracts, so the cheapest property is 'the one of the day', but there is little concrete evidence. The Arako team recently confirmed that the handover of projects and completed units is concentrated in major single-family residential areas such as Jumeirah Village Circle. (Source: DXB interact, omitted for reasons of space)

To estimate the number of households required for the growing population, it is supplied as 1 bed 50% / 2 bed 30% / 3-5 bed 20%, and if we assume that the average occupancy is = 1 bed (1.5 people), 2 beds (2.5 people), 3 beds (5 people including maid), it appears that one house is required for every 2.5 people. Add to that the number of properties required and the number of properties supplied by the Dubai government so far and expected by this year, and you can roughly understand the current market.

In 2020-2022, there was a temporary increase in supply. Although there were delays in projects that were already under construction, the oversupply occurred due to the decrease in population inflow due to Corona, and after that, the government was also passive in ordering new projects, so the supply to be completed in 2024 is 24,000 units this year, the lowest in the past 6 years, and the projects that were hastily announced after Corona are the highest ever at 48,000 units in 2026. If you compare the results of the table created so far with the price per sqft graph announced by the Dubai government, you can see that they match.

*Source: DXB interact

Numbers are always changing. Then, this question can be asked. If Dubai's population growth rate exceeds 2.8% and is estimated at 4-5%, anyone can expect a market surge. The economic situation in the UK, China, etc. may lead to a larger influx of people than expected. Even conservative estimates suggest that the supply-demand imbalance will be resolved around 2026. This is because it takes at least 1-2 years to plan, plan, and approve a project, and at least 2-3 years to air it.

If more people are expected, the Dubai government may fine people to build on any remaining land. This happened a few years ago. And they may push the supply by major construction companies to increase it from the current 30,000 to more by 2027. However, housing supply is slow and will not deviate much from the forecast. If the rapid increase has a negative impact on the real estate and labor market, the government may quickly build single-family houses in the empty Jebel Ali-DWC area. However, we think the Dubai government is still positive about real estate growth.

However, we must also consider the risk that Dubai's economy will suddenly fall into recession amid concerns about a global economic downturn. Up until now, the surrounding wars and political instability have served as advantages that made Dubai more attractive, but if the geopolitical crisis that began with the Iran/Israel incident affects the entire Middle East, a real estate recession similar to the Lehman Brothers crisis could occur.

In other words, if we take into account the inelastic housing supply as a constant and the global economic situation, the inflow forecast, etc., it may be possible to predict the Dubai real estate market. As an additional note, based on the experience of our nine Arako agents this year, there has been a sharp increase in investment consultations in Dubai and abroad, and the increase in contracts (transactions) has been significant.

Then, I will come back next time with a more fun and informative column.

Inquiry: Whatsapp 050-450-7824 / sue@arakorealestate.com / blog.naver.com/arako_dubaiproperty