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The marked shortfall in the required supply of middle-income housing continues to be an important issue across the UAE, Saudi Arabia and Egypt, according to a new JLL report. The social and economic impact of the shortfall suggests that while there is a general recognition of the problem and a growing number of policy initiatives and projects targeting the middle-income sector in the Middle East and North Africa (Mena), significant efforts are still needed to address the current imbalance.
JLL defines middle-income housing as that which is affordable to 40-60 per cent of households on the assumption that they spend no more than 30 per cent of their gross household income on housing. The report excludes labour accommodation and national housing projects where housing is provided by major employers for their workers or governmental agencies for local citizens.
The report notes that the definition of affordable varies across the region in terms of price point. It indicates that an affordable sales price in the UAE is around Dh790,000 with an affordable annual rent of around Dh72,000. In Saudi Arabia, the affordable sales price is around SAR450,000 (Dh440,794) and the affordable annual rent is circa SAR47,000. In Egypt, the affordable sale price is 285,000 Egyptian pounds (Dh133,682) and annual rent around 32,000 Egyptian pounds.
The report also states that the middle–income sector accounts for over 60 per cent of all households in both Saudi Arabia and Egypt, equating to 3.3 million households in Saudi Arabia and 12 million in Egypt. The relative numbers in the UAE are smaller, but there are still over 820,000 middle-income households, representing almost 40 per cent of all households in the country.
“We believe there is a need to rethink the existing relationship between Government and the real estate development industry to create more affordable housing that middle income families can afford,” said Craig Plumb, Head of Research at JLL Mena.
In Dubai, 22 per cent of residential units launched this year to date are bracketed as affordable to middle-income. “We have not seen any residential units being launched this year that meet our definition of affordable in the other markets,” JLL stated in the report.
Several factors have contributed to the shortage of affordable housing, including high land values, high capital costs for associated infrastructure development such as roads, electricity and sewerage, low adoption of prefabricated construction techniques, lower financial returns compared to other residential sectors that make such projects less attractive for developers and limited access to suitable finance for low-income families.
Source: Property Weekly