Affordable housing catches on
Affordable housing has become the new buzzword in Dubai’s property scene. Why?
Dubai’s property market is rarely out of the news. Be it booming or in the middle of a bust. In the last six months, the market has been fairly stable with prices remaining steady throughout the emirate.
What has picked up momentum in the industry, however, is a focus on affordability. Several new launches, billed as being affordable, have flooded the market and are reporting strong demand and sales.
Dubai Municipality also revealed plans earlier this year to introduce mandatory affordable housing quotas for all new residential developments.
It has also allocated over 100 hectares of land in Muhaisnah 4 and Al Quoz 3, and 4, to developers to build houses for rent for those earning between Dhs 3,000 and Dhs 10,000 per month.
The reason for this shift is fairly obvious. Residential sale and rental rates have increased rapidly over the last three years, outpacing salaries and making affordability a key concern for many residents, explains CBRE Middle East senior consultant Erik Volkers.
“Existing ‘affordable’ houses in freehold areas such as International City, Discovery Gardens and Dubailand have experienced sustained demand growth in recent years, pushing rates up to levels beyond the reach of many within low to mid income households,” he says.
Most of the projects delivered to date have also been targeted at the higher end of the market. Creating a shortage of housing for those families earning salaries around the United Arab Emirates average, adds JLL MENA head of research Craig Plumb.
“It is important that this sector of the market is catered for. It threatens the commercial competitiveness of Dubai and is also resulting in excessive commute times as many people employed in Dubai are being forced to seek accommodation in Sharjah and the northern emirates where prices and rentals are somewhat lower.”
A recent report from research firm Colliers International noted that there is a sizeable market for affordable housing.
The report showed that almost 50 per cent of households earn between Dhs 9,000 to Dhs 15,000 per month and can only afford rents ranging from Dhs 32,500 to Dhs 54,000 per annum.
Developers have begun to take notice. The massive Town Square project, launched this year by new developer Nshama, has received robust investor interest. Its modestly priced townhouses sold out soon after launch. Other developers such as Danube and GGICO have also revealed projects catering to the affordable segment, reporting strong sales.
But Volkers warns that not all the news about units being sold out should be taken at face value.
“We should be slightly cautious in our interpretation of such successes, when in reality perhaps only small phases of a project are being sold rather than an entire development,” he says.