Dubai affordable homes: How big is the shortage?

Every budget-conscious expat tries to find ways to lower cost of housing, but it remains greatest expense for many

10:03 November 21, 2016
International City mortgages UAE

Dubai: Every budget-conscious expatriate tries to find ways to lower the cost of housing, yet it remains the biggest expense for many people.  A new analysis calculates just how serious the affordable housing shortage in Dubai really is.

According to the latest research, the supply gap of cheaper flats or villas in the emirate is still fairly large, indicating that most tenants' budgets are squeezed.

The majority of Dubai's 2.6 million population are willing to rent properties that cost Dh100,000 a year or less, however, only 25 per cent of the residential units available today are within the price range. That means that the majority, or nearly eight out of ten properties, are beyond the budget reach of most households.

And what’s more, a lot of these affordable houses are a bit out of the way, such as the ones being built on Emirates Road. “The distance to work, an evening out or at the beach becomes that little bit further and the ‘attractiveness’ of living in Dubai [is] somewhat compromised,” a report released by a UAE-based listings site said. 

A noticeable gap can be seen within the villa segment, where both sale and rental values are showing “signs of growth,” which means that renting a standalone house with a little garden or front yard is still getting more expensive.

“A continued undersupply of affordable villas in Dubai is pushing up prices in this segment, enabling it to outperform a broadly lacklustre market that remains pressured by low oil prices and sluggish economic activity in the Gulf,” Propertyfinder Group said.

“These gains may be positive for investors but will not be welcomed by residents struggling to find somewhere affordable to live in Dubai, which is among the 10 most expensive cities globally.”

A separate research by real estate agent Cluttons showed that mid-range homes in locations such as Motor City, Emirates Living and Jumeirah Park, among others, have gotten slightly pricey for the budget tenant, with annual rents posting a 0.1 per cent increase.

Tenants in Dubai aren’t just looking for homes within their budget, they want to live somewhere close to the city centre or in family-friendly communities.

A closer look at online property searches of Dubai residents would show that Dubai Marina and Jumeirah Lakes Towers are among the most popular. People are also looking for more affordable housing in Al Nahda, Jumeirah Village Circle and Dubai Sports City, all part of the top ten most viewed communities.

The demand for more affordable homes will only increase over the short term, with the upcoming Dubai Expo 2020 expected to attract a huge influx of expatriates who are looking to enjoy a tax-free lifestyle.

“With the imminent arrival of Dubai Expo 2020, which will require thousands of new professionals to enter the local job market, both Dubai and Abu Dhabi are under pressure to provide affordable housing, to encourage expat workers to immerge their roots in the UAE.”

The issue, however, is impacting contractors in the region, who now find “their already tight margins squeezed even further by developers driving the growth of the UAE’s affordable housing sector.”

“This situation is likely to result in a more adversarial relationship between developers and contractors in the future,” the report stated.