Overstretched Infrastructure Could Hit Dubai Property Market

Summary: Dubai's booming property market could be affected by its already overstretched infrastructure need. Could the rapid pace of development in Dubai prove to be too much?

The incredible growth in Dubai’s property market over the past 5 years has resulted in an almighty struggle to keep infrastructure development up to speed. Dubai’s power and water demand is currently rising at an incredible 20% and 15% respectively every year, according to DEWA.

Dubai’s property developers and primary investors are growing increasingly concerned that the $300bn boom in real estate may be forced to slow as the Emirate’s state owned power and water utilities struggle to keep up with the demand for residential and tourism projects.

Peter Riddoch, chief executive of Damac Properties the UAE’s largest privately owned property developer said “The Dubai Electric and Water Authority is really struggling to keep up with demand and quite frankly I don’t think it is keeping up”.

“Power and water supply is one of the biggest challenges facing Dubai’s real-estate sector. In a number of areas the government is playing catch up,” he said, pointing out that currently none of Damac’s projects have been delayed to date, the concern being with the latest projects that are due to come on-line in the near future and through to next year. 

As more and more white collar expatriates choose Dubai for it’s unique high tech tax free lifestyle the demand continues unabated, the Emirate’s population is expected to grow by a staggering 30% to 2 million people by 2010, in a country where air conditioning is mandatory rather than a nice to have commodity, one can only just begin to grasp the sheer growth in power demands that the Dubai property market faces.

A report by the Arab Investments Corp said that the UAE will invest a further $61.2bn to boost power and water capacity by around 60% by 2011. Dewa plans to build a 9,000MW power and desalination complex near to the Abu Dhabi border, know as P station, they will also be adding 5,000MW at their new sites in the Al Habab power station by 2017.

As more and more real estate and tourism projects come to completion in Dubai and the population surges, power demand has been predicted to double over the next 5 years, there’s no doubting that the government’s water and electric authority have an incredible challenge on their hands.

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