House hunting in Dubai? Budget friendly options may be available in the near future
Budget-conscious tenants in Dubai may have more options to choose from. An additional 17,000 new homes are said to be delivered through the rest of the year, primarily in slightly more affordable locations such as Dubai Silicon Oasis, Dubailand and Jumeirah Village Circle. If most of the projected supply does get to the handover stage, it would mean there will be less demand pressure on the existing stock of rental properties in Dubai.
“Over the next four years, roughly 65,000 new units are penned for completion, 83 percent of these being apartments, and villas and town houses comprising the balance,” said Mat Green, head of research and consultancy at CBRE, which has just brought out a report analysing trends in the first three months of the year.
What Dubai’s residential space is in urgent need of is new supply, and more so within the mid-tier category. This applies as much for the existing resident base as it does for new expats who will be making the city their home in the near to midterm. Concerns have started to mount as tenants feel their wages have not been rising in lock with inflationary pressures on other fronts.
Apartment rents in Dubai are up 29 percent year-on-year, while those for villas have firmed up by 15 percent. Taken over a two-year time frame, rentals have put on 45 percent. “Despite recent regulatory changes, both rentals and sales prices continue to rise, albeit at a marginally slower rate than was recorded during the previous quarter,” said Green. “We expect to see an increase in the flight to affordability, with occupiers starting to consider Sharjah and the northern emirates as a cost sensitive alternative to Dubai.”
While 65,000 new units in four years may seem substantial, Dubai and its developers should already be thinking about adding more substantial supply of the affordable homes variety. According to a recent market analysis by Phidar, ‘Development should begin now to ensure adequate housing supply and control inflation. Speculation for completed properties over the past 12-18 months has already priced in and accounted for the next four years of additional demand generated from Expo 2020.
‘The precise premium for completed properties depends on a combination of location, quality, infrastructure, financing availability, and, perhaps most importantly, developer track record. Phidar analysed individual real estate development opportunities available in central locations, like Business Bay, and outlying areas, like Jumeirah Village Circle, and found that, the areas evaluated are approaching or have surpassed the premium ceiling’.
Phidar reckons that more than 80 per cent of employed residents ‘living in Dubai earn less than Dh10,000 ($2,700) per month’. If the number stacks up, it is also clear why the city needs to widen its base of accessible housing and that too now.
By Manoj Nair
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