After villas, affordable homes too face price rise in Dubai
DEVELOPERS LEFT WITH NO OPTIONS AS BUILDING MATERIAL COSTS SOAR
Here’s an alert for property buyers — prices of even the more affordable homes in Dubai could see a 10-12 per cent spike before year-end. Developers will have no option but raise their asking prices on ongoing projects if the cost of steel and other building materials continue to soar.
New luxury villa prices have already seen fairly sharp rises since the beginning of this year, through a combination of higher demand and from the cost of construction. If more affordable homes also start turning costlier all of a sudden, it could dent demand at a time when the market is seeing a bounce back.
“Prices of steel and cement have increased 35 per cent and 20 per cent, respectively, in the last eight or 10 months,” said Kalpesh Kinariwala, Chairman of Pantheon Development.
Feeling price pinch
“The rest of the building materials have more or less increased by the same levels. This resulted in a 6-8 per cent construction cost escalation.”
So far, off-plan property buyers have not felt the increases as developers refrained from passing on the costs. But if the current rate of increase in building material prices continue, they may not have that option for long. So far, “we optimised our operations to negate the effect — hence our existing project costs have not seen a major impact,” Kinariwala added. “We managed to hedge at least 70 per cent of the construction cost.”
Over the last three years, property values in Dubai dropped by an average 15-20 per cent set off by lower demand, persistent worries about oversupply in some categories, and a slowing economy. Developers had adjusted their prices in response — which is why when building material prices shot up all of a sudden from October last, they got hit with a double-whammy.
“While we were in the midst of awarding a contract, the spike was noticed in prices of steel, copper, cement/concrete and even supplies like white goods, elevators, etc,” said Vijay Doshi, chairman of Vincitore Realty. “In fact, on all shipments coming into the UAE.
“The pandemic situation also has contributed to the price increase as there have been lots of scarcity of resources. We are left with no choice but factor the higher cost for project completion.”
Suppliers won’t budge
It doesn’t end there. “Fuel prices are increasing; all raw material prices, especially metal, are also higher, which creates a domino effect,” said Doshi. “There is an acute shortage of containers to get shipments from oversees. Add to that the increase in freight costs, which is directly impacting the cost of materials used in projects.”