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For years, real estate developers in the UAE have been building and creating communities mostly targeting the high-end market.
With rental prices continuing their upward trend, nearly all tenants are left with no choice but to seek refuge in affordable emirates in spite of the long commute that such a decision involves.
Now, the clamor of residents for real estate developers to develop mid-market housing continues.
Will there be a solution in sight for budget-conscious residents? Zarah Evans of Exclusive Links Real Estate enlightens us on the matter.
Housing developments for the middle income segment
Access to affordable housing is, indeed, a human right and one that Dubai is losing sight of.
When I refer to affordable housing, I am not necessarily referring to the provision of housing to the low-income bracket, but affording housing costs in relation to a person’s income.
Following the strong performance of 2013, we have seen a progressive slowdown in the market during 2014. However, we have not yet witnessed a drop in rental prices, and the middle income segment workforce of Dubai is being forced out to neighboring emirates in search of affordable rents.
The average income for 50% of Dubai households is between Dh9,000 and Dh15,000. Generally, 30% of income is spent on rent, making setting the majority affordability in the bracket of rental prices between Dh32,000 and Dh54,000.
Emerging communities such as Dubai Sports City, Jumeirah Village, Jumeirah Park, International Media Production Zone and Dubai Silicon Oasis are priced above this, and even the affordable developments like Discovery Gardens and International City are now very quickly becoming unaffordable for budget-conscious residents.
Despite this, developers are typically continuing to concentrate on the upper end of the market.
Challenges facing developers in relation to building mid-market housing projects
Developers are always up against strong competition in delivering the biggest and the best, including incorporating several features into a project such as retail, leisure, recreation and healthcare facilities, and several dining outlets, to attract both buyers and tenants.
With land prices being so high, it does not make financial sense for a developer to build cheaper housing options.
Not until developers are provided with cheaper and well-serviced land will we see a turnaround in the provision of housing for the mid-market communities.
Developers recognize the public need and to address this they are now building projects in phases in line with demand.
Flight to affordability and this year’s Dubai rental trends
The government is striving to make housing more affordable for residents, with the rent cap and the introduction of RERA’s rental index, but more can be done to increase the availability of cheaper homes for lower-income expats.
There is still a concern for demand exceeding supply of projects being handed over in the residential pipeline.
The next four years should see around 65,000 units being handed over, with 83% of those being apartments.
However, affordability is still the major driver as Dubai encourages and supports a young age profile.
The demand for mid-market property far outweighs the supply, and not all segments of the society are being met.
Developers in Dubai are missing an opportunity, and Dubai is missing out in creating a layered commu-nity. This situation continues to deplete our economy as young professionals and their families are forced to commute home to neighboring emirates such as Sharjah and Ajman, and even Ras Al Khaimah and Fujairah, in search of more affordable options in living and facilities.
Current affordable areas in Dubai
• Al Barsha
• Al Ghusais
• Al Nahda
• Discovery Gardens
• Dubai Investments Park
• Dubai Silicon Oasis
• International City
Source: Ellen Joyce Soriano, Special to Freehold