A dearth of affordable housing is hitting lower and middle income earners in Dubai and harming the city’s competitiveness and ability to attract new residents, a new report from the real estate firm Colliers shows.
A shortage of two-bedroom properties priced between Dh32,000 and Dh54,000 means that a majority of Dubai’s residents face “limited housing options in terms of type and location in both the rental and freehold markets”, the report said.
“Households are being pushed to the brink [of what they can afford],” said Faisal Durrani, international research manager at Cluttons. “Household incomes have not kept pace with rent rises, so we’ve breached an affordability threshold.”
Dubai rents have risen by 27 per cent year-on-year according to the real estate consultancy JLL but are now levelling off.
Cheaper residential districts face the highest price rises, with rents in Discovery Gardens, International City and Deira growing by 30 to 35 per cent, amid high tenant demand for more affordable accommodation.
This means that “employees may be bearing a larger share of their rents themselves. If rents continue rising, households may not be able to absorb increased costs”, Mr Durrani said.
A shortage of family-sized freehold properties is also hurting residents. Only about 7 per cent of freehold properties costing less than Dh1 million have two or more bedrooms, while the average Dubai household has 4.2 members.
Expensive real estate is harming the city’s competitiveness, analysts said.
“The main issue is how are we going to cope with the expansion of Dubai and the increases in population,” said Ian Albert, regional director for the Middle East at Colliers International.
“We’re looking to attract the world’s best talent, [so] we need to make sure that the communities and the cost of living [is] in line with what’s needed to attract people here,” he said.
Further price rises are unlikely to affect Dubai's current population significantly, as many are protected by the emirate's relatively stringent rent regulations, Mr Albert said.
Despite evidence that price rises in Dubai are slowing, pressure could remain acute for workers on middle incomes, Mr Albert said.
Although new supply should help to reduce average prices, many of the new developments are set for high-end residential areas. About a third of forthcoming supply is located in Dubailand, Dubai Marina, Business Bay and Palm Jumeirah, data from Colliers shows.
“Very little stock that’s waiting in the wings is affordable,” Mr Durrani said.
Rapid population growth in lower and middle income segments is also likely to maintain upwards pressure on the price of cheaper housing.
Some residents have moved to Sharjah and the Northern Emirates because of high housing costs in Dubai. But Dubai’s economy suffers as a result, Mr Albert said.
“Dubai loses rental spend and housing spend, and a lot of productivity for businesses is lost, because workers have to leave early to get into the traffic,” he said.
Mr Durrani added: “When people need to save money, they will look elsewhere.”
About one third of Dubai’s population, or 1 million workers, commute into Dubai daily from Sharjah and the Northern Emirates, according to estimates from the Dubai Statistics Center.
Mr Albert said that development of affordable accommodation could be hastened if the government connected currently unused suburban areas with electricity and water connections.
“We have the road infrastructure,” Mr Albert said, “But the government needs to connect [outlying and suburban] land to the utility infrastructure to encourage development.”
abouyamourn@thenational.ae
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