THE FUTURE OF THE REAL ESTATE INDUSTRY OF DUBAI: THE DEMAND FOR REAL ESTATES (2000 – 2020)

Abstract

The main objective of this study is to estimate the demand for real estate (buildings) in
Dubai and use this estimate to calculate elasticities and to forecast the demand in the coming years.
I have constructed and estimated a simple econometric model. The model was simple due to severe
data limitations on useful economic variables.
Linear model was found to best fit the data on the demand for buildings in Dubai. All estimated
coefficients are well determined at the 5% level of significance with signs expected by economic
theory. The analyses showed that population and interest rate have no significant effect on the
demand for buildings, while price and income have.
The paper concludes that demand for buildings in Dubai grew very rapidly in the past and farther
continues growth in the future. The total demand will increase from 8893 building in 2018 to 14328
building in 2020.
Elasticities are less than one indicating an inelastic demand for real estates. This will not only
require significant investments over the coming years, but will require more efforts by the Dubai
government to prepare more affordable building blocks, especially for Expo 2020.