• The lack of development has hindered the emergence of new projects.
• Asteco’s quarterly report shows a double-digit increase in apartment rentals.
• New Dubai areas, offering freehold properties, are experiencing higher demand for new units.

Due to a surge in population and insufficient supply of fresh units, certain areas in Dubai are experiencing a shortage of smaller apartments. Real estate industry executives point out that Old Dubai areas like Bur Dubai and Deira are grappling with this shortage because the lack of available development areas has hindered the emergence of new projects in those localities. This inability to keep pace with demand is particularly challenging given the rapid population growth in the emirate.

Dubai’s population increased by more than 100,000 last year and over 176,000 in the past two years, primarily due to the influx of foreign expatriate workers, professionals, and investors. Meanwhile, the number of new units delivered in the last couple of years falls significantly short of the population growth, resulting in a scarcity of smaller rental units.

According to real estate consultancy Asteco’s quarterly report, affordable and old Dubai areas have witnessed a double-digit increase in apartment rentals in the third quarter of 2023, rising by up to 23 percent compared to the same quarter last year.

Additionally, New Dubai areas, offering properties in freehold areas, are experiencing higher demand for new units. This has encouraged developers to launch more projects in these new and upcoming areas.

Industry executives assert that New Dubai areas have sufficient supply for smaller units to meet the growing demand of a population estimated to reach nearly 6 million by 2040.

Focus on high-end developments:

“Old Dubai faces a shortage of smaller units, featuring larger and more spacious apartments constructed 20 to 35 years ago. During that period, Dubai’s population was significantly smaller, mainly comprising families with several children. Consequently, private owners developed notably spacious apartments with multiple rooms to meet the demands of the residents and citizens. For instance, the majority of two-bedroom units include an extra room for a helper, along with spacious laundry and storage rooms, not to mention en-suite bathrooms for each room,” said Svetlana Vasilieva, sales director for secondary market at Metropolitan Homes.

Alan James Gammon, Chief Operating Officer of ACE Luxury Property, highlighted several reasons for this scarcity, including population growth, increased demand for small living areas, and a focus on constructing high-end real estate developments rather than affordable housing options.

Gammon emphasized that the demand for old established communities in Dubai continues to be high, especially in Bur Dubai and Deira, where limited capacity for new construction exists.

“While Old Dubai’s cultural richness adds to its appeal, the scarcity of space hinders the availability of smaller homes and additional services. Therefore, many new residents in old areas have to live in sublet and shared apartments.”

Gammon added that New Dubai, characterized by its contemporary residential and retail projects, expansive land area, and luxurious residences, offers a greater supply of studios and one-bedroom units. “The allure of a modern lifestyle, coupled with state-of-the-art infrastructure and amenities, attracts residents to New Dubai, potentially leading to shortages in these sought-after areas. But the New Dubai lifestyle comes with a bit higher price tag.”

Over the past few years, as Dubai’s property market continued to boom, Lewis Allsopp, Chairman of Allsopp & Allsopp, noted a rise in luxury, ultra-luxury, and branded residences. Since then, the market has also experienced limited availability of affordable housing and smaller units.

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