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A few years back, waterfront luxury apartments or grandiose golf villas catering to the millionaires defined the real estate scenario in Dubai. But now developers are attracting the salaried middle class with a host of housing options and innovative payment plans.
Andrew Chambers of GGICO Properties shares his views on the latest real estate trends in Dubai.
Demand and supply
There is a good demand for housing in the mid-range segment for couples and young families. These are one or two-bedroom houses with sizes of around 600-1,200 square feet. These units are in the price range of Dh700,000-Dh1.2 million. These cater to those with a monthly salary of Dh12,000-Dh15,000. They can borrow around Dh500,000- Dh700,000 over the next 15 years and buy a house. With monthly mortgages of around Dh3,000-Dh5,000, accounting to around 30-35 per cent of the household monthly income, making a transition from staying in a rented house to moving to your own is not a pipe dream anymore. Before the recession, there were very few houses available in the market which cost below a couple of millions.
This segment of the real estate sector is witnessing a steady demand as the Dubai population is growing and the majority of new arrivals to the city are salaried middle-class expatriates. The new stock is currently easily absorbed. Only if the population growth falls below 6-7 per cent in the next few years will there be an oversupply.
In the high-end market, the market is static. The developers in areas like Emirates Hills and Jumeirah Golf Estates are releasing properties according to demand. There was a time when hundreds of units at Arabian Ranches and Jumeirah Lakes Towers came into the market at once. It is no longer the case now.
New payment plans
To cater to the mid-market segment, there are innovative payment plans introduced by developers. For example, the 30-70 plan was launched when Platinum Residences at Dubai Silicon Oasis (DSO) came to the market. Here, the home buyer needed to pay 30 per cent at the time of construction while the remaining 70 per cent was paid after project handover. In such a scheme, the home buyer does not need to cough up the entire amount at one go which is a big relief. He has three years to either pay off the remaining 70 per cent or can take mortgage after moving into his house. The monthly installments will commence once he moves into his new house. You know you are making payments for a property which you can physically see being constructed. If the developers do not pitch in with these finance options, the homeowner has to approach banks which can fund only around 50-65 per cent of the total cost of a property and the remaining amount has to be arranged from family savings, which can put a financial strain.
The trend of developers introducing new payment plans is fast catching up with schemes like 50-50 and 40-60 being available. With these schemes, most of the properties are snapped up by the end-users. We have virtually seen the exit of flippers from the market.
When a property like Grand Horizon in the mid-market segment was launched in Dubai Sports City (DSC), its market price was pegged at Dh800,000-Dh1.2 million. It catered to families with a monthly income of Dh15,000 who were buying their first house in Dubai. It was also a good investment proposition for those buying to rent. Typically, this would be individuals with a monthly income of over Dh30,000 and this property is bought more as an investment which has the potential to give them good rental yields. A one-bedroom house can fetch a yearly rental of Dh65,000-Dh70,000 while a two-bedroom unit can earn Dh110,000 per year.
Most of the new developments in the mid-market segments are located in DSC, DSO and Jumeirah Village Circle (JVC). There are some affordable units in Tecom. A number of new off-plan properties are launched in JVC. This residential cluster has seen its infrastructure getting a facelift. Its proximity to Shaikh Zayed Road is also a big asset. In recent times, we have seen some of the big developers launching small villas and townhouses with a price tag below one million which shows there is a growing demand for the mid-market segment.
How the Dubai market is faring by Jones Lang LaSalle Dubai Real Estate Market Overview Q4 2014
• The second half of 2014 saw Dubai’s residential market stabilize as average rents and sale prices remained relatively flat, with marginal declines over the last quarter.
• On an annual basis, the REIDIN rental index shows growth levels dropping from 18% in 2013 to 15% in 2014. Similarly, the sales market saw some cooling down as the REIDIN sales index points to a decline in growth levels from 23% in 2013 to 20% in 2014.
• The residential sector is likely to remain subdued over the next 12 months as the market is expected to absorb 25,000 additional units in 2015.
Read more - Dubai realty market shows clear signs of growth
Source: S. Dhar, Special to Freehold