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The Dubai real estate market can sustain its growth by introducing more affordable housing projects that are priced between Dh400 and Dh600 per square foot, according to international property agency Chesterton. It claims expats or end users are looking at owning property in Dubai, but the majority is put off by the shortage of affordable property.
Simon Gray, Managing Director of Chesterton Middle East and North Africa, says, “Property markets across the world are driven by middle-class end users. Low down payment requirements, job security and social security provisions have created necessary infrastructure for home ownership in most economically developed nations.
“The UAE can also benefit tremendously by introducing attractive propositions for this segment as the majority of residents can look at owning property and create a sustainable market.” The housing affordability gap in the world equals around $650 billion (Dh2.38 trillion) per year — 1 per cent of global GDP, according to reports. In some of the least affordable cities, the gap exceeds 10 per cent of local GDP.
“Affordable properties can be priced in the range of Dh400-Dh600 per square foot,” says Gray. “This can be backed with long-term restrictions on resale, restricting speculative activity.”
According to Chesterton, affordable housing is an overlooked opportunity for developers, investors and financial institutions worldwide. If current trends in urbanisation and income growth persist, the affordable housing gap in the world would grow from 330 million urban households to 440 million by 2025.
“Many developers are readjusting their portfolios to meet the end user demand,” says Gray. “However, targeting the end user presents a couple of challenges for developers. Supply of affordable units is another issue in the market. Most such projects have been developed by private developers who lack credibility in the market and, therefore, are not considered genuine by end users.
“Large developers in Dubai shy away from catering to this segment particularly due to lower margins.”
Having only a small percentage of the resident population able to afford mortgages in Dubai remains a big hurdle for the long-term sustainability of the market, says Robin Teh, Country Manager of Chesterton. High down payment requirements also make most Dubai properties beyond reach of expats, who otherwise would have been able to afford them.
“An affordable market could be the answer to demand stagnation and thereby encourage genuine buyers to enter the market,” says Teh. “However, it would also require strategic changes in regulatory and legal infrastructure as well.”
Source: Property Weekly