For over a decade, Dubai has been known for luxury. From its high-end villas to its up-market apartments, the region was known for property prices that were comparable to some of the most expensive cities in Europe, Asia and North America. Due to this, Dubai often attracted high-net-worth individuals, looking to invest in the area’s luxury.
However, Dubai seems to be changing this perception of itself. Following recent years of trouble and decline in the region, Dubai is moving away from being unapologetically aspirational and towards lower prices. Dubai’s approval of a low-income housing policy was an important moment for the property market, with the emirate seeing an embracing of affordable property. But how is this working?
How is this shift being seen?
Throughout Dubai, property purchases are shifting towards the lower end of the scale, with the statistics already confirming this. According to the Affordable Housing Institute, 82% of transactions in 2017 were below AED 2 million, and almost half – 47% – were below AED 1 million. The overwhelming majority of transactions – 85% – were for apartments. This is showing how the market is now being controlled by budget-conscious residents and market-savvy investors, as smaller and lower priced properties are rising in popularity.
Dubai’s affordable housing policy
This shift towards affordable housing has been facilitated by the approval of a low-income housing policy in Dubai, which came into force March 2017. The policy classifies low-income people into Emiratis and non-Emiratis, including expats and workers, in strategic sectors in Dubai. As well, the policy includes families’ income levels, place of residence, and public benefits and will compare them with requirements at the time and the extent of challenges families are facing. Through this, they are aiming to provide housing units for low-income working people and renovate some old areas in Dubai.
In its December 2017 Dubai Property Market Outlook report, international real estate consultancy Cluttons noted that the move will help Dubai avoid many of the mistakes made by other cities around the world. In particular, it will be helping rein in the emergence of poorly connected low-income neighbourhoods that are segregated from the rest of the city.
Speaking to Arabian Business, Faisal Durrani, the Head of Research at Cluttons, says that Dubai’s affordable housing policy comes at critical time for the emirate, just before a massive influx of new residents arrive into Dubai to take up jobs related to the delivery of Expo 2020.
Durrani states: “When we talk about the Expo, we are talking about 300,000 new jobs over the next three years. Of the jobs that are created, the vast majority will be low- to middle-income households,” he says. “We’re looking at circa 80,000 units to be delivered by the end of 2020, and a population growth of 500,000 new households.”
A need for clarity?
While this move has been highly praised, there is still some question over what will be classified as affordable.
Talking to Construction Week, the CEO of UAE-based Aurora Real Estate Development, Cian Farah, comments: “When we talk about affordable housing, we have to distinguish between social housing, which requires government subsidies, and housing that is affordable for a specific income bracket… When discussing affordable housing in the UAE, we typically refer to the latter. However, if we look at the UAE housing market, we find that the majority of houses available to rent do not fall into the ‘affordable’ bracket.”
Moving toward, if Dubai is to truly embrace the affordable housing market, this expense must be clarified. For the region to completely cater to this lower-wage income bracket, they first must understand their market and budget.
While the lower-priced housing market in Dubai is by no means perfect, the region is taking important and necessary steps to shift towards affordability.
About Samir Salya
Samir Salya is the Chairman of Reign Holdings and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.