‘Affordable’ Dubai housing still too pricey – report
Buying property still ‘out of reach for the lower income members of society’
So-called “affordable” housing in Dubai is still too expensive for many low-earners, according to a report by real estate firm Core, the UAE associate of Savills.
The term is being used only “in a very loose sense”, Core said, with more needed to be done by the private sector to address the shortage of cheaper living.
It said “good work” is being done by the Dubai Government over the issue, given a proposed law to make a 15-20% of future residential developments comprise of affordable units.
But a lack of mortgage options – with most banks looking for a minimum income of AED15,000-20,000 per month before granting finance – means that those on low incomes are further restricted.
“The current new supply is catering largely to the middle income segment and affordable living is yet out of reach for the lower income members of society, thus pushing occupiers to rent at penalising high yields instead of transitioning to own,” said David Godchaux, CEO of Core.
“We are witnessing a surge of off-plan properties which are being marketed as ‘affordable’ options. Some of these projects have tried to achieve the intent through innovative construction, marketing strategies and flexible payment plans, yet many don’t fit the economics of a lower income end user.
“Buyers would be subject to higher down payment in the case of an off-plan property in addition to their current rent. With delayed project deliveries, they cannot risk this scenario and hence continue to rent.”
Godchaux also pointed to the issue of cost of maintenance and depreciation of property, given the wear and tear of the tough climate, and cheaper building materials often used in affordable units.
“Across the world, to build affordable housing, builders largely resort to cheaper materials and specifications to reduce their construction costs leading to lower quality of construction,” said Godchaux.
“This, in due course, translates to faster depreciation of the building and higher maintenance costs. Investors and occupiers (by mechanism of higher rents) are generally not favourable to spending more on maintenance for affordable properties than they would on a more expensive asset due to the very nature of this low cost investment. This results in even faster depreciation of the property – or a very strong negative impact on mid to long term yields when high refurbishments or maintenance costs become unavoidable to keep the unit competitive in the market.”
