There is a lack of affordable housing for families in Dubai, which developers and investors can benefit from and help the community, says Colliers International
Developers need to build more affordable housing in Dubai – which can still provide high income for investors, says a leading international agent.
Up until 2020 there are expected to be 51,000 home build in Dubai, but half of them are likely to be mid or high-end properties, says Colliers International in a new White Paper.
Add in estimated population rises of 5% a year, there is set to be a shortage of affordable homes to rent and many families are forced to move from Dubai in search of cheaper options, according to the Addressing The Housing Gap – Measuring Affordability Levels in Dubai report.
Ian Albert, Regional Director of Colliers International, Middle East, says, “Affordable housing when developed effectively, can provide high returns for investors. Community facilities such as neighbourhood retail, schools, healthcare services and leisure facilities can generate significant additional revenue for the developer, whilst maintaining affordable rental levels.
“Developing a community integrated with such facilities in well-connected locations (easy access to the main arteries, and public transport network), attracts high occupancy rates and retains the value of developments.
“Anecdotal evidence suggests that there are approximately one million people commuting to Dubai from Sharjah, due to more affordable accommodation in the neighboring emirate. Increasing the availability of affordable units in Dubai is likely to attract a significant share of these residents.”
Many families renting are having to move to cheaper Gulf countries or even move to other countries, says Mr Albert.
“As the cost of living and raising a family becomes untenable for your average family, at best they will look to a neighbouring emirate for accommodation and schooling, and at worst they will look to more attractive, affordable countries in the Gulf or further afield.
“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.
“An average occupancy level of 87% in Dubai reflects a healthy market. However, with demand growing at a higher rate than supply, market fundamentals are likely to move towards an undersupplied market”
There are around 120,000 freehold apartments in Dubai. Around six in 10 (59%) cost less than Dh1million, but most are studios and one-bedroom apartments, which are too small for the average family in Dubai of 4.2 members.
Two-bedroom apartments below AED 1million represent just 5% of the market, and those below AED2million make up 9%.
“It is Colliers’ opinion that the mismatch between affordability and the availability of suitable housing, needs to be addressed when planning future developments,” the report concludes.
By Adrian Bishop, Editor, OPP Connect