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What are the differences between the affordable property markets in Dubai and Abu Dhabi?
Dubai has a vast supply of affordable apartments available especially for lease, with most of the supply in Dubai’s traditional areas (Bur Dubai and Deira) qualifying as affordable. These areas are among the most popular as they are central, well connected and supported by a large number of retail and convenience facilities.
In comparison with Dubai, Abu Dhabi has a significant lack of purpose-built affordable apartment communities, with Al Reef Downtown being the only development currently available in proximity to the city.
Whilst alghadeer also offers excellent value for money, the development is located at the border of Dubai, off Mohammed bin Zayed Road and in proximity to the Al Maktoum International Airport. As a result, alghadeer is targeted at people working in Dubai, rather than Abu Dhabi.
Are we set to see an increase in affordable developments?
Developers are seeing strong potential for affordable developments going forward, especially since many of the residents in the lower to mid-income brackets are confined to the rental sector by not having access to mortgages or other long-term sources of housing finance.
New projects specifically targeting this segment include the expansion of Remraam with the construction of 18 affordable apartment buildings due on the fourth quarter of 2016. Its modern amenities and facilities, and proximity to the major highways and the Al Maktoum International Airport are some of its major draws.
There is also a new development, Glitz, at Dubai Studio City. It offers future homeowners more than 200 units of studio to three-bedroom apartments in contemporary finish. The community will feature food and retail outlets and several other facilities and amenities.
What about the mid-market? What areas are proving popular there?
Jumeirah Lakes Towers (JLT), MotorCity, Business Bay and The Greens are considered as Dubai’s most attractive mid to upper-mid-end communities. Overall, these areas benefit from an attractive offering, set in communities that include open areas, landscaping and general good levels of facilities and amenities.
Furthermore, with the exception of MotorCity, all these developments are situated along the Dubai Metro Red Line, making them convenient residential destinations. Each of these developments includes a variety of buildings of different qualities at different prices, making them suitable for a wide range of tenants.
We have noted that families tend to prefer JLT, MotorCity and The Greens as these have more open spaces and gardens, making them suitable for children.
In comparison, Business Bay appeals more to singles, couples and smaller families as the area is yet to be fully established.
Where can I find cheaper communities in the country?
Amongst the master planned developments, International City remains the cheapest community despite witnessing significant rental growth especially in 2013. Its current rents start at Dh32,000 for a studio and Dh42,000 for a one-bedroom unit. It is also one of the most transacted communities in Dubai, with over 1,900 transactions recorded in 2014.
Communities such as Dubai Sports City and Dubai Silicon Oasis are currently priced in the affordable bracket as they are still incomplete, with significant levels of ongoing construction.
We, however, expect that as these communities complete, some of the better quality buildings would most likely see price increases, putting them in the mid-income bracket category. This is especially true for Dubai Sports City which, once the canal is flooded and IMPZ’s City Centre Me’aisem is completed nearby, will have good levels of supporting facilities in an attractive environment, in proximity to The Els Club.
Question of the Week
How did the mid-market perform overall in 2014?
Despite a general slowdown in the market, popular mid-end communities performed relatively well last year with rental rates up by 6% on average, with Jumeirah Lakes Towers (JLT) witnessing the highest growth of 14% over the year.
Nonetheless, it should be noted that the growth was mostly witnessed in the beginning of the year as the second half of 2014 saw pressure on rates and sales prices, with average quarterly decreases of 1% for such communities.
In terms of transaction levels, JLT is the most transacted mid-end community, coming fourth overall in Dubai as a whole (after Dubai Marina, International City and Downtown Dubai).
With rents rising for high-end and prime properties in Abu Dhabi, residents are searching for more affordable options that still offer community facilities and quality finishing.
As such, mid-end apartments have performed well over Q4 2014 with an average increase of more than 5% all across Abu Dhabi.
Danet Abu Dhabi and Al Rayyana have recorded even stronger rental growth, up by 10% respectively, as they are very popular, particularly for teachers and middle management due to their relatively good quality housing options, facilities and amenities.
Source: John Stevens, Special to Property Weekly
The writer is the Managing Director, Asteco