Dubai has many famous high-rise buildings and luxury homes, however, many of the buyers are looking for reasonable priced homes to live in. Affordable home communities for middle income buyers will give them the opportunity to own a home while still being connected to their community and having comfortable amenities. They would be able to purchase an affordable home in a neighborhood with good access to amenities including shopping malls, schools, hospitals, highways and other forms of public transportation.
Dubai’s Affordable Housing Zones: Where Value Meets Opportunity
The term affordable housing in Dubai generally describes homes that are built in planned communities that are somewhat away from the very best (ultra-prime) water front districts in Dubai. In addition to being less expensive than homes in the ultra-prime districts, homes in affordable districts also have easy access to highway, shopping malls, schools, hospitals, and public transportation. The purpose of developing affordable housing districts in Dubai is to create a quality of life environment that allows residents to fulfill their basic needs on a daily basis.
Buyers looking for affordable housing have historically chosen neighborhoods such as International City and Dubai Silicon Oasis.
Why Mid-Range Buyers Focus on Affordable Housing
Affordable housing areas provide stable real estate options as opposed to speculative housing areas. Affordable housing is generally priced lower and has a higher occupancy rate than speculative areas; this provides a lower risk option for investors looking to obtain rental income. In addition, affordable housing communities tend to have a longer term lease agreement compared to speculative areas and are typically occupied by a larger percentage of Dubai’s work force. As such, they continue to receive a high volume of tenants regardless of the market conditions.
When viewed from the standpoint of an investor, affordable housing can also provide a higher level of return on investment (ROI) through increased rental yield. When combined with lower purchase price levels and vacancy rates, affordable housing investments can provide the ability to increase cash flow for an investor.
Lastly, from the perspective of the owner/user, affordable housing options provide an additional opportunity for renters to convert into homeowners. The monthly mortgage payment in some cases is close enough to what it would be to rent, which makes purchasing a home a long-term viable decision. Additionally, as you pay down your mortgage you will begin to build equity, which is a second way that homeownership provides a financial benefit.
Key Areas Offering Affordable Housing Opportunities
Affordable housing is growing in the UAE beyond the well-known suburbs of Dubai, and at least two examples are Al Furjan and Town Square Dubai. Both of these master-planned communities have incorporated many elements of daily life, including parks, shopping centers and recreational activities, which are generally included in higher priced developments; however, developers are learning that in order to compete in this market they will need to offer quality amenities in addition to affordable prices.
The infrastructure has a significant impact on the growth of affordable housing in the UAE. Because they provide an easy means of commuting around the city, areas that are close to major highways (Sheikh Mohammed Bin Zayed Road, Al Khail Road) tend to retain high levels of demand. Areas where a metro station or additional public transportation options are planned also have a much greater long term potential for appreciation than those without.
When evaluating a purchase opportunity it would be beneficial for buyers to review the past transactions of the development, the average rents in the area and the developer’s track record prior to making a decision. In some cases, excessive development in an area may negatively affect rent prices in the short term, but as time passes, if the area retains its appeal to renters, the negative effects may dissipate.
Practical Considerations Before Buying
Only affordability should not be the determining factor for making a purchase decision. The evaluation of service charges, quality of the maintenance and general management of the building are also important in this context. Although some affordable housing projects can be attractive in terms of pricing, they can have an associated high annual fee which will reduce the effective rental income.
The financing structure also plays an important role. A mortgage applicant’s ability to secure financing is affected by factors such as their financial situation and credit history, the applicable interest rate and the required down payment, all of which can vary based upon the investor’s profile and the policies of each bank or lender. The careful evaluation of financing options will ensure that the affordable housing project remains economically viable for the investor in the long run.
It is equally important to clarify what you want. For example, investors who rent out properties are likely to give a priority to the rental yield from the property and the demographic characteristics of tenants, whereas owner-occupiers are likely to place greater emphasis on the location of schools, supermarkets and health care facilities near to the property. Affordable housing can support both these objectives if it is chosen appropriately.
Navigating the Market with Professional Guidance
Keyspace Realty and Keyspace Dubai are both designed to assist clients looking at affordable options in Dubai and are provided with the necessary guidance as they seek out affordable housing in the Dubai area. Keyspace’s team reviews current market data, assesses rental demand and identifies mid-range neighborhoods that match client objectives. Unlike simply providing property listings with little or no additional information (price benchmarks, yield projections, etc.), Keyspace provides its clients with information regarding how to best negotiate an advantageous purchase price. As such, Keyspace provides the means for their clients to transition from being uncertain about what to do in the highly competitive nature of buying real estate, to being clear and confident in their decisions.
Long-Term Outlook for Affordable Housing in Dubai
Dubai has seen tremendous growth in its population, a rise in new business and industry sectors, as well as new developments in its infrastructure which are continuing to drive interest in affordable housing for both renters and buyers. The number of professionals moving to Dubai from other cities and countries to find employment is also fueling a need for relatively affordable residential options.
In addition, government incentives that create a more stable environment for long-term residency and encourage investors will help grow the base of the affordable housing market. Most affordable housing communities have a high absorption rate (i.e., they absorb a large percentage of new residents), which reinforces their ability to maintain high occupancy levels. Affordability also contributes to the ability of certain mid-range districts to be resilient during times when market cycles may cause price fluctuations due to over-building or under-demand.
Affordable housing provides buyers in the mid-range category with more than just a less expensive purchase option; it provides them with an opportunity to begin building equity through their home ownership, generate a source of rental income and provide long-term capital appreciation on their investment. When combined with proper research, financial planning and professional guidance, buyers can establish themselves for long-term growth in the ever-changing landscape of Dubai’s real estate market.
Frequently Asked Questions
What is “Affordable Housing” as it applies to Dubai?
In general terms, Affordable Housing represents mid-range residential options that are offered at a price point that is lower than luxury markets but still in locations with easy access to services and amenities and a consistent level of demand.
Are Affordable Housing options attractive investments?
Yes; While many mid-range neighborhoods have solid levels of rental demand and reasonable returns (as long as buyers consider ongoing service charge payments and the potential for new supply), investors should exercise caution before making an investment decision.
Do Affordable Housing communities provide residents with access to high-quality amenities?
Many development options offer such community-based features as parks, shopping centers, schools and on-site fitness facilities as part of their offerings to help create a convenient environment for daily life.
May Expatriate individuals purchase Affordable Housing in Dubai?
Yes; However, expatriates may be able to purchase property in designated Freehold areas of Dubai provided they meet the requirements of both local government regulations and the lending requirements of local financial institutions.
