Investments in Real Estate in Dubai. UAE Construction Sector is Growing
16.05.2024
3 min
1
The UAE construction sector is showing steady positive dynamics. The total value of pending construction projects in the Middle East and North Africa (MENA) will reach $3.9 trillion, with the UAE accounting for 15%, according to JLL's latest report on the UAE construction market.
According to data for the first quarter of 2024, the UAE stands out with a $590 billion portfolio of high-value projects in the region's project market. Residential projects account for $125 billion (21%).
As a leading player in the UAE real estate market, Dubai recorded significant growth in home sales and rental prices, up 21% year-on-year, with approximately 10,000 residential units delivered in the first quarter of 2024.
Around 25,000 more apartments are planned to be delivered by the end of 2024, increasing Dubai's total housing stock to around 754,000 units.
In the hospitality sector, Dubai added 2,000 new rooms in the first quarter of 2024, mainly in the 5-star hotel segment. A further 5,000 rooms are expected to be added throughout 2024, raising the total to 160,000 hotel rooms in Dubai and 34,000 in Abu Dhabi, where around 500 rooms will be added.
JLL maintains an optimistic outlook for the UAE, marking a significant milestone in 2023 with project values almost tripling compared to 2023. According to MEED Projects, their projects totaled $87 billion, up from $31 billion in 2022, highlighting the country's significant progress in achieving the goals of economic diversification and attracting investment.
Laura Morgan, Head of Market Analysis MEA, Project & Development Services at JLL, said: “With resilience and promising growth prospects across all sectors, the UAE construction market is showing a strong growth trend. Last year, the sector added $42.9 billion, accounting for almost half of total projects.”
Despite projected increases in land and construction costs in 2024, strong new project implementation will ease this pressure and support sector growth.
The UAE's GDP will grow 3.8% in 2024, up from 3% in 2023, with a forecast of 3.9% in 2025, according to Oxford Economics. Although the S&P PMI came in at 56.9, down slightly from February's 57.1, the sector remains on a strong growth path, Emirates NBD Research found.
Taking into account historical construction price trends, market conditions, fixture costs and external factors that may affect prices, JLL's forecast points to tender price inflation (TPI) in the UAE at 3% in 2024.
The report also suggests that to address rising costs, developers in Dubai may consider building smaller properties and projects in less central areas.
The RICS Global Construction Monitor noted an increase in construction activity despite financial constraints due to rising costs and sometimes material shortages. The RICS report also highlighted market competition, demand dynamics, delays associated with materials and project financing, and the adoption of digital construction processes.
Oil prices will average $81 per barrel in 2024 and 2025, while base metal prices will decline by 5% in 2024, according to the latest World Bank data.
The JLL report notes that fluctuations in shipping and transportation prices have a major impact on local construction rates due to reliance on imported materials such as glazing, façade systems and timber. From March 2023 to March 2024, freight prices increased significantly, with the Drewry index increasing from $1,800 to more than $3,000 per 40-foot container.
But JLL points to stability in material availability at present, with local manufacturing capabilities improving in the medium to long term.
The World Steel Association (WSA) estimates global steel production will rise by 1.9% in 2024, following a 1.6% decline the previous year. JLL also forecasts steel demand in the Middle East and North Africa region to recover in 2024, driven by megaprojects and the housing sector.
Investments in residential and commercial real estate in Dubai bring consistently high returns. Get a free consultation from a professional realtor in our Dubai office. Write a message in the online chat or contact the indicated numbers.
According to data for the first quarter of 2024, the UAE stands out with a $590 billion portfolio of high-value projects in the region's project market. Residential projects account for $125 billion (21%).
As a leading player in the UAE real estate market, Dubai recorded significant growth in home sales and rental prices, up 21% year-on-year, with approximately 10,000 residential units delivered in the first quarter of 2024.
Around 25,000 more apartments are planned to be delivered by the end of 2024, increasing Dubai's total housing stock to around 754,000 units.
In the hospitality sector, Dubai added 2,000 new rooms in the first quarter of 2024, mainly in the 5-star hotel segment. A further 5,000 rooms are expected to be added throughout 2024, raising the total to 160,000 hotel rooms in Dubai and 34,000 in Abu Dhabi, where around 500 rooms will be added.
JLL maintains an optimistic outlook for the UAE, marking a significant milestone in 2023 with project values almost tripling compared to 2023. According to MEED Projects, their projects totaled $87 billion, up from $31 billion in 2022, highlighting the country's significant progress in achieving the goals of economic diversification and attracting investment.
Laura Morgan, Head of Market Analysis MEA, Project & Development Services at JLL, said: “With resilience and promising growth prospects across all sectors, the UAE construction market is showing a strong growth trend. Last year, the sector added $42.9 billion, accounting for almost half of total projects.”
Despite projected increases in land and construction costs in 2024, strong new project implementation will ease this pressure and support sector growth.
The UAE's GDP will grow 3.8% in 2024, up from 3% in 2023, with a forecast of 3.9% in 2025, according to Oxford Economics. Although the S&P PMI came in at 56.9, down slightly from February's 57.1, the sector remains on a strong growth path, Emirates NBD Research found.
Taking into account historical construction price trends, market conditions, fixture costs and external factors that may affect prices, JLL's forecast points to tender price inflation (TPI) in the UAE at 3% in 2024.
The report also suggests that to address rising costs, developers in Dubai may consider building smaller properties and projects in less central areas.
The RICS Global Construction Monitor noted an increase in construction activity despite financial constraints due to rising costs and sometimes material shortages. The RICS report also highlighted market competition, demand dynamics, delays associated with materials and project financing, and the adoption of digital construction processes.
Oil prices will average $81 per barrel in 2024 and 2025, while base metal prices will decline by 5% in 2024, according to the latest World Bank data.
The JLL report notes that fluctuations in shipping and transportation prices have a major impact on local construction rates due to reliance on imported materials such as glazing, façade systems and timber. From March 2023 to March 2024, freight prices increased significantly, with the Drewry index increasing from $1,800 to more than $3,000 per 40-foot container.
But JLL points to stability in material availability at present, with local manufacturing capabilities improving in the medium to long term.
The World Steel Association (WSA) estimates global steel production will rise by 1.9% in 2024, following a 1.6% decline the previous year. JLL also forecasts steel demand in the Middle East and North Africa region to recover in 2024, driven by megaprojects and the housing sector.
Investments in residential and commercial real estate in Dubai bring consistently high returns. Get a free consultation from a professional realtor in our Dubai office. Write a message in the online chat or contact the indicated numbers.
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