Balancing supply and demand key to real estate sustainability; boost investment
Real estate, like any other sector, is totally dependent on the principle of supply and demand. This means the prices of homes or any other real estate, like those of stocks and bonds, increases when there is more demand and decreases when the supply exceeds the requirement of the market.
There are several indicators which determine the prices of real estate, but the supply and demand equation in the housing market is a much looked-at indicator. The factors that can affect housing market supply and demand include mortgage rates, cost of building material, jobs, household income, local market factor, returns and local laws.
It is not easy to balance the supply and demand in real estate. Creating more saleable properties takes time, effort, and considerable work. At times it is not possible to create real estate with the pace with which it is required. In this scenario, the prices skyrocket when the demand for real estate is high, and the property is scarce. Similarly, the prices decrease when the number of available properties exceeds the requirement, creating a glut in the market.
Therefore, to maintain an equilibrium, Dubai in 2019 established a Higher Real Estate Planning Committee to enable the Emirate to manage its real estate supply and demand. The committee aims to develop a strategy for all major real estate projects over the next 10 years. This is expected to create a sustainable environment for investors and companies by maintaining balance between supply and demand in the real estate market.
Controlling supply and demand will play a vital role in real estate sustainability for the coming years, along with dependence on proper planning. Maintaining a balance in the sector will not only help achieve the objectives and predefined strategies with great precision, but will enable effective urban planning, leading to a direct impact on the economy of the country. The real estate projects need to be placed right to bring more value to the national economy and prevent imbalance in the economic process.
After witnessing a lull due to COVID-19 pandemic, the sector is recovering owing to preemptive action by the Dubai government, which did a great job of getting the city back up and running as quickly as possible after the covid-induced restrictions. The successful rollout of vaccination and EXPO 2020 have played a great role in the sector’s recovery, bringing new businesses and a new wave of expats to Dubai.
Besides high capital appreciation and gross rental yields, the interconnectivity of different real estate developments will bring more selection and choice to the real estate market, leading to inevitable interest from outside investors and add excitement to the residents of Dubai.