Dubai takes flight to affordability
Savills has ranked Dubai as the third most affordable major global city for purchasing prime residential property.
Once the mere mention of Dubai conjured up images of some of the world's most luxurious properties, and projects which only the well-heeled, overtly ambitious and aspirational would call home.
Now, however, the real estate landscape is changing as the city moves to ensure market maturity and sustainability. Dubai's real estate is moving towards a more balanced mix of homeownership. Responding to demand, the shift towards affordability is changing the development landscape. Apartments are taking the lion's share of development potential, as they are the more affordable option for residents prepared to invest in the emirate they call home. The Affordable Housing Institute points to the fact that in 2017, of Dubai's total real estate transactions, 85 per cent were for apartments with demand mostly in the Dh1-2 million price range.
Affordable housing is also leading to a switch in Dubai's residential fortunes with reverse migration now evident. UAE residents who previously worked in Dubai but lived in other more affordable emirates are now finding their way back. Affordable housing projects have sprung up around the city at Jumeirah Village, Dubai South and Studio City for example, and they have been snapped up.
The affordable housing trend is being helped along by a slew of developer finance initiatives. The market is now seeing flexible and extended payment plan options which is a sure sign of maturity. Also gathering momentum are rent-to-own (RTO) accords, where an agreed percentage of a rent is apportioned towards the down payment of a property and, after an agreed, predefined time frame, the buyer can either buy the property or exit the agreement. RTO has become a more viable option for buyers and sellers following last year's launch of Dubai Land Department's Ijarah service which enables RTO deeds to be registered providing a clear legal structure for the facility. RTO is increasingly being seen as a viable way for developers to move existing completed inventory with buyers being able to buy through turning their rent into equity.
Though some developers have dipped their toe in the affordable housing market, there's plenty more scope. Currently only 20 per cent of all the emirate's housing stock is affordable, although demand from the affordable sector is set by analysts at 40 per cent of all market demand.
Even the city's prime real estate is now becoming more affordable. The city was recently given a major vote of confidence in its market maturity with international property consultants, Savills, ranking Dubai as the third most affordable major global city for purchasing prime residential property, and the fourth best global hub for returns on investment averaging 4.6 per cent. The Savills' World Cities Prime Residential Index showed that Dubai property and transactional prices have dropped over the past five to ten years making it a prime time for domestic and foreign investors to consider the emirate.
This all bodes well for the rental market. With prime residential property now more affordable, lower transaction costs and ever improving quality specifications, there's increasing potential for strong rental yields for long-term investors.
The market is shifting in emphasis and its vital that all involved in the industry keep with the curve, if not ahead of it, to sustain success. Key market indicators and development trends will be outlined at the Cityscape Global Conference taking place at the InterContinental Dubai Festival City on September 24, while the Cityscape exhibition takes place from the 25th until the 27th at the Dubai World Trade Centre. Serious industry players can't afford to miss it.
- Chris Speller is the group director for Cityscape. Views expressed are his own and don't reflect the newspaper's policy.