Over the past few years, the term “affordable housing” has gained popularity points and has become much more common both in the media and in the dialogues of professionals. Let’s say right away – many do not fully interpret the concept of accessibility to the end. And someone simply does not know where it begins and where it ends.
In today’s article – we discuss points related to affordable housing and the term “affordability”.
Accessibility is relative: a macro view
Currently, there is an increase in the construction of 3-4-star restaurants and hotels in Dubai, rents are decreasing by 20-25%, real estate prices have decreased by 30-40% and are only now starting to stabilize. In general, everything has become cheaper.
All over the world, people spend an average of 30-33% on their homes. At the same time, the factor of making a decision about their housing began to weaken – everyone wants to see the economic benefits of housing, its comfort and the level of security of the country where it is located.
Affordable housing: is it relevant at all?
Whether it really makes sense to put it into a separate category, given the general decline in property prices, is the main question.
Dubai has given the green light to low-income housing policies. However, the UAE government has not yet formally defined what it is “affordable”.
According to a 2018 report from Deloitte, “In Dubai, rent or mortgage repayment is considered affordable if it is less than AED 9,300 per month – or approximately AED 112,000 per year.”
Statistics show that the current average selling price for a studio apartment in Dubai is AED 670,000, but prices vary greatly. For example, a one-bedroom apartment in Jumeirah Lake Towers can cost AED 675,000. 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 sale for 2-3 years after completion. Thus, they will be purchased by real end users. That will allow to open the lending market and charge foreign lenders for real estate.
Prices for some properties are still falling
According to the global assessment of statistics, in the period from 2015 to 2019, property 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 market experienced an average decline of about 15% from its peak in Q3 2014.”
In this connection, a logical question arises – if real estate prices have decreased in one way or another, does widespread development of new “affordable” housing make sense?
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 their accommodation. Those who are thinking about long-term residence or investment often look towards the premium or super-premium sector.
According to the Deloitte report, developers are also choosing high-end projects because of the higher margins: “Margins are generally low in the real estate development industry in Dubai 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 what has always been and will be a priority. The demand for properties with less square footage is great – as long as it is well located, offers access to popular amenities, and is built by reputable developers.
Rather than treating affordable housing as a panacea, it is still imperative for developers to keep a focus on the specific needs of buyers and their values.
Dubai is really affordable compared to other cities
While there is an abundance of luxury properties here, the cost of buying a standard mid-range 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 expensive markets.
Compared to other leading cities in the world, Dubai is surprisingly affordable considering the quality of life it offers.
Therefore, the question of “accessibility” remains rather rhetorical and still ambiguous.