Developers in the region are missing out on a market opportunity as they fail to capitalise on the sizeable affordable housing market in Dubai, a new study has found.
According to the latest report from research firm Colliers International, almost 50 per cent of the households in Dubai earn between Dhs9,000 to Dhs15,000 per month and can only afford rents ranging from Dhs32,500 to Dhs54,000 per annum.
This has created a large gap in the market for affordable housing where the majority of the population are renters, the report said.
“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,” said Ian Albert, regional director at Colliers International.
“What this means in the Dubai market is mid-market properties that are suitable for young working families or professionals.”
As per international standards, a commonly accepted guideline for housing affordability is when accommodation costs are within 30 per cent of a household’s gross income.
“Owing to the recent growth in rental and sales prices in Dubai, this market segment has chosen to live in neighbouring emirates such as Sharjah and Ajman where greater options are available to them,” said Albert.
“This is not only a missed opportunity for Dubai developers who should be looking to capture this sizeable market by creating affordable communities that cater to its needs, 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 report also noted that there was a lack of appropriate housing in the Dubai market with many of the current units being out of reach for the middle-income households in the emirate. This has forced them to rent studio or one-bedroom apartments in International City, Deira, Al Qusais and Al Nahda.
Albert said that the continued rise in cost of living will negatively impact the economy, as it will eventually force these households to relocate to other affordable Gulf economies.
The report also said that the affordable housing market has the potential to provide developers high returns for investment as there was a 13 per cent gap in demand and supply of such units in the market.
“It offers huge potential, however, to be achieved it is critical that developers are provided access to well-located and serviced land. Only then will we see a policy for the development of mid-market housing come to fruition in Dubai,” said Albert.
A recent report by property consultant Asteco showed that Dubai’s rental growth has slowed down in the third quarter with affordable communities such as Discovery Gardens and International City seeing values fall by seven per cent.
However, year-on-year rates in these developments rose 23 per cent and 40 per cent respectively.