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According to a recent report by commercial real estate services firm Colliers International, there is an affordability gap that exists in Dubai’s housing market. The report, Addressing the Housing Gap, reveals a mismatch between the demand for and supply of appropriate midmarket property, highlighting the social and economic benefit of creating a diverse market that meets the needs of all segments of society.
“When we talk about affordable housing in Dubai, we are not referring to low-income housing, but rather housing that is affordable for a household in relation to its income,” says Ian Albert, Regional Director of Colliers International. “What this means in the Dubai market is mid-market properties that are suitable for young working families or professionals.”
Because of the recent increase in rental and sales prices in Dubai, most households that who belong to the mid-market segment have chosen to live in neighbouring emirates, particularly Sharjah and Ajman, where there are still a number of options available to them, says Albert.
“This is not only a missed opportunity for Dubai developers who should be looking to capture this sizeable market, but it also directly affects the economy as productivity levels are lowered when a large percentage of the workforce suffers from a long commute.”
The study reveals that 50 per cent of Dubai households earn between Dh9,000 and Dh15,000 per month. Following internationally accepted standards of what a household can afford to spend every month on accommodation, this limits rental or mortgage repayments to Dh32,500-Dh54,000 per year.
Despite the size of this market, Colliers points to not only the lack of housing at this price level, but also the lack of appropriate housing options, with households in this income bracket restricted to studios or one-bedroom units in International City, Deira, Al Qusais and Al Nahda.
“Although the rate of growth in the sales market has slowed, the average two- or three-bedroom unit in Dubai is still beyond the reach of most working families,” says Albert.
Key findings of the Colliers report
A commonly accepted guideline for housing affordability is when accommodation costs are within 30 per cent of a household’s gross income.
50 per cent of Dubai households earn between Dh9,000 and Dh15,000. At this income bracket, they can afford rental levels between Dh32,000 and Dh54,000 per year.
35 per cent earn between Dh15,000 and Dh25,000 a month. They can afford rentals between Dh54,000 and Dh90,000 per year.
15 per cent earn Dh25,000 and above per month and their rental affordability starts at Dh90,000 per year.
While established communities such as Palm Jumeirah and Dubai Marina continue to witness significant increases in rentals, more affordable housing locations such as Jumeirah Lakes Towers, Discovery Gardens, International City and Deira have witnessed the highest increases in rental rates at 30-35 per cent year-on-year, highlighting a growing demand for affordable housing.
Those earning Dh12,000 per month are not only limited by location, but are also restricted to studio units. One-bedroom apartments within their budget are those in International City, although these cost marginally higher than 30 per cent of their monthly income. Those with a monthly income of Dh25,000, there are many options, albeit the majority are limited to studios and one-bedroom apartments.
Source: Property Weekly