Dubai can take on 25,000 new housing units each year

Dubai's burgeoning population means it is able to absorb the creation of 25,000 new housing units each year.

This is according to the latest report by Citi bank, which stated the fall in construction activity has given the emirate the chance to recover from the economic downturn and reduce the problem of overcapacity. The statistics showed vacancy rates had peaked in 2010 and were steadily declining year-on-year.

The study showed the construction industry contributed less than eight per cent towards the emirates GDP last year, compared to the 14 per cent achieved in 2008. It pointed out this would go some way to alleviate fears the sector would not be able to withstand another financial crisis and the same policy mistakes were being made all over again.

Furthermore, the report claimed at the current rate the population is increasing (said to be around seven per cent), more construction projects could be given the go-ahead, while still maintaining vacancy rates. 

However, the study warned market regulators must take great care to avoid a return to the property bubble situation that caused the industry to nosedive in the wake of the global financial crisis. It also called on the re-emergence of 'flippers' to be closely monitored. These are buyers who immediately sell on their investments to make a quick profit. 

Prices are also set to increase further this year, with the chief executive officer of Dubai Investments, Khalid bin Kalban, commenting the growth in the emirate's real estate sector was only just beginning. He argued the cost of property was still quite a way below the levels seen during the peak periods.

“Prices fell from the peak of 2007 and 2008 by a maximum of 60 per cent and a minimum 40 per cent; we even haven't reached that 40 per cent," he added. "Though we have seen increase of up to 20 per cent, we haven't really come back to the value of 2008."

Despite the warnings, the overall outcome of the report was positive. It claimed Dubai had now weathered the financial storm and was displaying a balanced economical return to fortune, making it more resilient to market tremors.