Over recent years the phrase “affordable housing” has grown in popularity and the term more frequently heard in media outlets and within conversation. But what does it really mean and what are the real parameters of affordable housing?
In today’s article, we discuss issues related to affordable housing and the term “accessibility”.
Currently, Dubai is experiencing an increase in the construction of 3-4-star restaurants and hotels, rents have reduced by 20-25%, property prices have decreased by 30-40% and are only now beginning to stabilize. In general, everything has become cheaper.
Worldwide, people spend an average of 30-33% on their homes. But, similarly interest in people investing in their homes has waned. Everyone wants to experience the economic benefits of housing, including its appeal, level of comfort and its overall feeling of security.
Given the general decline in property prices it may be difficult to fully compartmentalise or categorise what affordable housing currently is.
Dubai gave the green light to low-income housing policy. However, the UAE government has not yet officially determined what “affordable” is.
According to a 2018 Deloitte report, “In Dubai, rent or mortgage payments are considered affordable if they are less than 9,300 UAE dirhams per month – or approximately 112,000 UAE dirhams per year.”
Statistics show that the current average sale price for a studio apartment in Dubai is 670,000 UAE dirhams, but prices vary greatly. For example, a one-bedroom apartment in Jumeirah Lake Towers can cost 675,000 UAE dirhams. But the same real estate in International City will cost half the price.
Given that the average wage is AED 16,775 and the cost of living is relatively high, and given that there is a transitional international population, is this amount really affordable?
According to a number of real estate experts, more developments are needed, such as Discovery Gardens or one step higher in quality between Discovery Gardens and JLT, with restrictions on sales for 2-3 years after completion. Thus, they will be purchased by real long-term users. This will open up the lending market and charge foreign lenders for real estate.
According to a global estimate of statistics, between 2015 and 2019, real estate prices fell by 30-40%. And while the outlook is far less bleak today, Deloitte’s 2018 report also shows that by November 2017, “Dubai’s residential property market had shrunk by an average of about 15% from its peak in the third quarter of 2014.”
This raises a logical question – if real estate prices have somehow declined, does it make sense to develop a wide range of new “affordable” housing?
Will less expensive housing really affect the total number of owners?
For those who come to Dubai for a short time, as a rule, there is no urgent need for accommodation. Those who think about long-term living or investing are often targeted in the premium or super-premium sector.
According to the Deloitte report, developers also choose high-end projects due to higher margins: “The margins in real estate development in Dubai are generally low compared to other industries.” Therefore, they have little incentive to build cheap housing.
And here we come to the most important point – quality. This is something that has always been and will always be a priority. The demand for a property with fewer square meters is great – as long as it is well located, offers access to popular amenities, and is built by reputable developers.
Instead of treating affordable housing as a panacea, developers still need to pay special attention to the specific needs of buyers and their values.
Despite the abundance of luxury real estate here, the cost of buying a standard middle-class home in Dubai is still extremely affordable, unlike many other major cities around the world.
Hong Kong remains the most expensive city in the world to buy real estate. In Europe, these are Munich, Amsterdam and London. In the US, New York and San Francisco remain the most affluent markets.
Compared to other leading cities in the world, Dubai is surprisingly affordable, given the quality of life it offers.
Therefore, the availability issue remains rather rhetorical and still ambiguous.