Only 22% of housing units launched in Dubai in 2015 are ‘affordable’ – JLL

There has been a significant push in Dubai’s property market towards affordable housing, but only 22 per cent of residential units launched so far this year in the emirate are “affordable”, a report by JLL has found.

The report, which analysed property markets in the United Arab Emirates, Saudi Arabia and Egypt, found that the Middle East and North Africa region faces a major shortage of middle-income housing.

The middle–income sector accounts for almost 40 per cent or about 820,000 of all households in the United Arab Emirates, the report stated. That figure increases to 60 per cent in Saudi Arabia and Egypt, totaling 3.3 million households in the kingdom and 12 million in Egypt.

In 2011, JLL identified the need for an additional 3.5 million affordable homes across the region.

“This gap has almost certainly increased over the past five years as the vast majority of developments delivered and conceived throughout MENA over this time have been aimed at more affluent households,” the report stated.

JLL defines ‘middle-income’ housing on the assumption that households spend no more than 30 per cent of their gross income on housing.

The report excludes labour accommodation and national housing projects and identifies two major components to the market – properties for sale and those for rental.

The definition of affordable varies across the region – in the UAE, prices of around Dhs 790,000 with annual rents of around Dhs 72,000 are considered affordable.

In Saudi Arabia, an affordable sales price stands at around SAR 450,000 while the affordable annual rent is SAR 47,000. In Egypt, the affordable sales price is circa EGP 285, 000 with annual rent at around EGP 32,000.

“[Apart from Dubai] we have not seen any residential units being launched this year that meet our definition of ‘affordable’ in the other markets,” the report added.

A recent report from research firm Colliers International showed that almost 50 per cent of households in Dubai earn between Dhs 9,000 to Dhs 15,000 per month and can only afford rents ranging from Dhs 32,500 to Dhs 54,000 per annum.

To cater to that demand, new developer Nshama unveiled the massive Town Square project this year, which received robust investor interest. Its modestly priced townhouses sold out soon after launch. Other developers such as Danube and GGICO have also revealed projects catering to the affordable segment, reporting strong sales.

The Dubai Municipality also revealed plans earlier this year to introduce mandatory affordable housing quotas for all new residential developments.

It has also allocated over 100 hectares of land in Muhaisnah 4 and Al Quoz 3, and 4, to developers to build houses for rent for those earning between Dhs 3,000 and Dhs 10,000 per month.

Head of Research at JLL MENA Craig Plumb said: “Governments around the region have started to allocate significant financial resources to encourage more development of middle-income housing, but more needs to be done.

“We believe there is a need to re-think the existing relationship between government and the real estate development industry to create more affordable housing that middle income families can afford.

“We also recommend more innovative planning and design initiatives to create more attractive, environmentally sustainable and cohesive communities as well as accessible financing, empowering middle income families to take a stake in their future.”