Estate Agent in Dubai

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Low-cost housing set to pick up pace in 2018

Dubai is often hailed as the queen of luxury housing. After all, it has some of the world's tallest and most expensive properties, securing a spot among top housing markets globally. As the business hub in the Middle East, Dubai surely has a real estate market to match and it is rapidly growing, and it's only going to grow stronger in the coming years.

However, Dubai's appeal is not limited to its luxury high-end priorities. Led by a surge in young and middle-income working class population, Dubai is witnessing an incremental demand for affordable housing similar to that seen in major international markets in the late 90s into early 2000s.

This has not gone unnoticed by domestic and regional real estate developers. Numerous developers have identified affordable housing as a leading growth segment, reporting double-digit sales growth. Many are seeking to capitalise on this upswing by offering generous and flexible payment schemes, thus bringing the prized asset within the reach of many and turning tenants into owners. This trend is expected to pick up significant pace in 2018.

In the past year, the regulators too have displayed immense support for the affordable housing segment. The Dubai Land Development (DLD) plans to incentivise developers to build affordable housing options in central locations, thereby addressing the gap in the market for such offerings.

Underpinning the appeal of affordable housing are the twin drivers of population growth and employment opportunities. Dubai plays host to vast number of opportunities for international investors, and as a result of which the sector is in many ways fragmented and unaffordable - for the local population.

International investors still represent a clear majority of the Dubai property transactions; a number significantly higher than that seen in more developed markets. This balance is shifting, aided by a surge in population and more people entering into the workforce.

The Expo 2020 is a critical catalyst in generating employment opportunities and attracting top talent from various parts of the world. Standard Chartered expects 300,000 new jobs to be created between 2018 and 2021, resulting from hosting the international event in Dubai. With so many new jobs being created, all signs are pointing towards a rise in demand for affordable housing in 2018 and beyond.

Furthermore, according to the Dubai Municipality, Dubai's population is projected to grow to over five million by 2030; it is bigger than major international cities such as Sydney and Singapore. In short, this trend signals a new reality - the next few years will present a large, localised population that is shielded from the vagaries of foreign investments in local property markets, and where demand for affordable housing is high and rising.

It is little surprise, then, that real estate developers are responding with a number of affordable residential projects in the pipeline. This trend is expected to continue to shape in 2018 and the effect will be felt for years to come, simply because for developers seeking critical mass and for investors providing a reasonable return on their investments.

Furthermore, Dubai currently offers yields which are already between eight to 12 per cent, one of the highest in the world. By comparison, properties in London offer around three to four per cent returns while in Mumbai, a 2.5 to three per cent return on rentals is common.

Further boosting the appeal of the affording housing segment are the attractive extended payment plans being offered by developers. However, with significant number of projects in the pipeline, it will be critical to see if both parties honour their side of the commitment, with developers delivering projects on time and investors honouring their payments as promised, which could determine the future of the sustainability of affordable freehold housing in Dubai, at least in the medium term.

Editor's Note: This article was originally published in Thomson Reuters Zawya on Tuesday January 9th, 2018 http://bit.ly/ZawyaLowCostHousing