Dubai’s middle-class still waiting for affordable homes

From a quaint fishing town to a vibrant, cosmopolitan city today that houses people from over 200 nationalities, the rise of Dubai into a modern metropolis is truly an awe-inspiring tale. In the larger context it has enabled the UAE evolve into a modern society that embodies the human spirit of overcoming all difficulties and emerging stronger from the experience.

But being the melting pot for many diverse cultures comes with its own set of challenges, including a growing demand for affordable housing to house Dubai’s growing population. It’s a challenge that still remains to be overcome, despite the launch of key initiatives like the Federal Mortgage Caps about two years ago and several new projects catering to this segment like the recent Serena and Arabella 2 launched by Dubai Properties earlier this year.

However a recent Clutton’s survey based on the Ministry of Economy Household Income Survey - 2008 has hinted a clear disparity between incomes and cost of living in the UAE. According to the survey, the average annual incomes (among expats) here stood at approx AED 200,000, while average residential rentals across Dubai’s freehold zones stood at AED 181,000. 

Further middle-class residents have been hit hard by a decline in overseas allowances caused mainly by the ongoing turbulence in global markets. In response developers have shifted their focus to only single households and families with a gross income between AED 240,000-360,000.  

Clearly the real estate industry needs to shift its focus to building affordable projects that will appeal to a far larger majority of the population, while simultaneously helping to consolidate and sustain Dubai’s property market.    

Encouraging affordable housing is likely to have a positive impact on other sectors of the local economy in terms of boosting health care, education, transportation systems, ensuring the growth of the leisure and entertainment industry, help sustain small-and medium-sized enterprises, create a differentiated market segment for the realty industry and more importantly attract more investments by encouraging demand across various sectors. 

The recent launch of the rent calculator by RERA has been another important step towards ensuring the stability of Dubai’s property market. Not only is this online tool updated on an annual basis, it has been made easily accessible to end users in keeping with its key objective of monitoring and reducing the disparity between demand and supply.

While such initiatives are a step in the right direction, there are other issues that have also made an impact. For example, the continued volatility in the prices of oil and commodities, has forced buyers and investors to focus on managing their funds more efficiently.   

Not surprisingly, the payment terms being proposed by developers are now being closely scrutinized by both, end users and investors constrained with a limited access to liquid funds. However this is also expected to bring more stability in the overall realty market by creating a balance between supply and demand.

With Dubai pulling out all stops as it readies to host the prestigious World Expo 2020, it now has the opportunity to showcase its prowess as a cosmopolitan society by encouraging more development modeled on the lines of the Al Khail Gate and Remran projects, that have been customized to meet the needs of Dubai burgeoning middle-class.