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Developers in Dubai are still not building enough affordable homes, according to a new report.

Developers in the region are missing out on market opportunities as they fail to capitalise on the sizeable affordable housing market in Dubai, a new study has found.

This study report by Colliers International argues that the average income of around 50% of all Dubai households is AED9,000 to AED15,000 per month.  Given that household affordability is generally set at a maximum of 30% of income, which means affordable rents should be approximately between AED32,000 to AED54,000 per year.

However, only a limited amount of areas in the Emirate offer homes within that price band, Discovery Gardens, Dubai Silicon Oasis, Al Qusais, Deira and Al Nahda are cited as examples.  Even then, such homes tend to be studio or one-bed units and the average household size in Dubai is 4.2 family members.

The report argues there is a mismatch between supply and demand in the local market, with developers typically concentrating on the upper-end segment.

Although house price growth had slowed recently, “the average 2 or 3 bedroom unit in Dubai is still beyond the reach of most working families” and that, with home ownership no longer an option, families have been pushed towards the rental market where prices are also relatively high.  This represents significant challenges for Dubai.

Between 2014 and 2020, for example, an estimated 51,000 dwelling units are due to come onto the market, and over 50% of these are in the upper-mid and high-end of the market.

Colliers International’s regional director Ian Albert said: “When we talk about affordable housing in Dubai we are not referring to low-income housing, but rather housing that is affordable for a household in relation to its income.

What this means in the Dubai market is that mid-market properties that are suitable for young working families or professionals and also because of the recent growth in rental and sales prices in Dubai, this market segment has chosen to relocate to neighbouring Emirates where greater options in dwellings, schooling, and amenities, etc. are available to them.  Moreover as the cost of living and raising a family becomes untenable for an average family in Dubai, it will even look to more attractive, affordable countries in the Gulf or further afield.

This is not only a missed opportunity for Dubai developers who should be looking to capture this sizeable market by creating affordable communities that cater to its needs, but it also directly affects the economy as productivity levels are lowered when a large percentage of the workforce suffers from long and strenuous commuting back and forth to work.

A recent report however, by property consultant Asteco showed that Dubai’s rental growth has slowed down in the third quarter of this year with affordable communities such as Discovery Gardens and International City seeing values fall by 7%.  Could that be a signal for anything of a change in the market orientation?  Will this change develop and become some sort of a trend throughout Dubai and the rest of the neighbouring GCC region.   Will the local authorities address the above issues and incentivise the developers in moving into this segment of the market.

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