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DUBAI-Housing development has not kept up with demand here in recent years but the situation is changing, according to a new report from Colliers International. In response to vacancy rates that are less than 1%, some 240,000 new housing units are slated to come online here before 2010, the majority of them apartment units. Of the 126,500 units under construction in Dubai, all but 16,500 are apartments units, according to Colliers' research.

An estimated 100,000 people move to Dubai every year. Since 2000, demand has outstripped supply by 6%. This has occurred despite a 42% rise in the number of residential buildings between 2002 and 2005 to 79,000 and a 61% increase in the number of overall housing units to 234,930. The result has been a drastic increase in rental rates. Rents have risen at an average clip of more than 20% over the past three years, according to Colliers International.

With the development push, Colliers is predicting that occupancy could decline and, with it, rental rates. The softening may not last long. Colliers also is predicting that as supply becomes available and rents soften the market will see a migration from multi-tenant units to single-tenant units and from smaller and older units to larger and newer units. The new supply may also help reduce the out-migration to alternative cities such as Sharjah and Ajman, where rental rates are 35% to 50% lower.