With the government slashing its project spending amid the oil slump, the private sector will dominate the real estate sector in Dubai accounting for over 70 per cent of total supply of the emirate's housing units over the next few years, said a report.
Historically, government-sponsored developments act as a flight to safety, as witnessed in Dubai Marina, stated Reidin, a leading real estate information company focusing on emerging markets.
During the global financial crisis, government-sponsored developers' units contributed nearly half of all transactions, which otherwise on average accounted for 20 per cent, it said.
A dissection of Dubai current supply reveals that the housing stock is split nearly evenly between private sector developers and government sponsored developers, according to the report.
However, as Dubai undergoes its second construction frenzy, the topography of housing units will be highly skewed towards private sector, it added.
According to Reidin, this structural change in the roll out of Dubai's housing stock highlights the pivotal role of the private sector in coming years.
"In the current real estate dip, we witnessed that the ratio remained the same, signaling a paradigm shift of confidence towards private sector developers," the property expert stated in the report.
"Moreover, a price analysis between government sponsored developers and private sector developers reveals that in three out of four communities, private sector developers have outperformed, highlighting the shift in the structure of the market," it observed.
In real estate, the liquidity premium phenomena between government-sponsored developments and private sector developments in Dubai has greatly reduced.
This trend is likely to continue as quality improvements and future supply is likely to be dominated by private sector developers, said Reidin in the report.
With a likely compression in expected developer margins, there are indications that prices in premium areas will drift lower, both in the off plan and the ready spaces, it stated.
Relative price performance between the assets of government sponsored developers and private sector developers is likely to skew towards the latter, it added.-TradeArabia News Service