- Defining affordability key for tackling the problem, says Cluttons executive
- Few developers offer solutions for lower end of the market
Dubais real estate market will fail to serve the low-to-mid-range segments of the residential market as long as affordability definitions remain ambiguous, says Faisal Durrani, international research and business development manager at the UKs Cluttons Real Estate.
The average annual expatriate income is about AED200,000 [$54,452] a year, so if you are talking about a household that earns that amount a year and then you are sending them to go get a mortgage that is about three and four times that, which means AED600,000-AED800,000, there is very limited stock in that price bracket, Durrani told MEED, speaking on the sidelines of real estate exhibition Cityscape in Dubai. You have squeezed middle, similar to what you have in the UK.
Durrani went on to explain that there are very few developers offering products in this price range.
Analysts have suggested the move towards more affordable housing is part of the markets maturing process and, with introductions such as the mortgage cap, end-users are being forced to look towards the lower end of the property ladder.
As such, Dubais villa market has been hit the worst by this drive for affordability. Durrani said Cluttons is predicting a 5-7 per cent contraction in the value of villas across the emirate by the end of the year.
Dubais real estate market has weakened across all asset classes in the first half of this year, with the hotel and residential segments witnessing the biggest slowdown, according to US real estate firm JLL. Rents and sales prices have been depressed by a decline in residential activity as well as the large number of units due to be delivered in the next couple of years.
Further to this, residential transactions recorded by the Dubai Land Department show a 66 per cent contraction in sales values and a 69 per cent decline in the number of transactions in the first half of the year, compared with the same period in 2014. The first six months of 2015 saw 7,400 deals completed compared with 23,800 in the same period last year.