If your looking to buy a house in Dubai, you might have heard about the new initiative by the Dubai Government to promote affordable housing; their goal is to make home owning more accessible to home buyers like yourself. We’ve read a lot of conflicting information about affordable off-plan properties in Dubai floating around on the internet, but you can count on us to give you the rundown of what you need to know right now about affordable off-plan properties in Dubai.
So here it is, The good, the bad, and the ugly.
Right now it’s a buyer’s market in Dubai, so it’s an excellent time to invest in property. The prices have fallen for seven back-to-back quarters, and lately just about every other development that’s being built is heavily toned down compared to the past ten years. In September, a few new additions to the affordable housing were launched.
Dubai South is releasing apartments with mortgages starting at 280,000 AED in its “The Pulse” and “The Villages” development, whereas NSHAMA (a subsidiary of Emaar) said it would build a whole residential community of affordable housing name “Town Square” with apartments starting at 230,000 AED. Both developers are offering flexible payment plans for their off-plan properties.
The government is also taking steps to aid home buyers in the mid to lower income brackets. The Government has set guidelines to make it mandatory for the developers to devote 15-20 per cent of their new developments towards affordable accommodations. It should be a break for the people that have lower incomes, but it seems like developers and investors have been taking advantage of these new guidelines as well, which leads us to our next topic.
As we mentioned before, the Dubai Government has set guidelines where developers have to make part of their developments into affordable housing. These guidelines have the general public thinking that affordable housing is becoming more accessible, and while that’s the goal, it hasn’t exactly worked out as planned. The reason? Developers are giving preference to off-plan properties to their A-list clients. As a result, the swell in affordable housing projects development in the past year and a half has been misleading to the general public, because these projects are sold to the A-list investor during VVIP pre-launch events. There are also indications that some of the off-plan properties of the VVIP launch events are sold at a discount on the advertised price. These tactics directly affect the public as a whole bit leaving little supply to young professionals and young families looking for an affordable home.
The off-plan marketing tactics used by developers has made affordable off-plan properties sell out quickly, this directly limits the supply to the general public, but also causes secondary market effects. As these properties are quickly bought up by A-list clients and savvy investors, this promotes of investors listing their properties in the secondary market to make a quick profit.
Properties being bought out by unscrupulous investors who then inflate the prices and sell them to the general public has made affordable housing less accessible to the public as a whole. It’s unfortunate that properties that are targeted to the low to middle-income class seldom reach their target market.
While they are calling it “affordable housing,” in most cases, it’s still too expensive for many low and middle-income families, who find it hard enough as it is to secure a mortgage. In fact, one of the more recent studies by the real estate consultancy says even though they’re using the term ‘affordable housing’, they’re using it in a broad sense.
With “affordable” apartments coming it at around Dh430,000 for a one bedroom apartment, it can be hard for residents to swing that when they’re making less than AED10,000 per month. Lender options for lower wage earners are scarce as banks typically operate at an income threshold of AED15,000-AED20,000 per month for giving mortgages.
Some banks do grant mortgages for those receiving as low as AED10,000 per month – but only with strict eligibility standards. To make matters worse, many developers are not complying with the government’s regulations, most importantly the one that states that developers building high-end luxury projects should reserve a certain percentage of the property for the lower income segment of society. However, this rule has principally remained on paper only and hasn’t been enforced, despite all the hype about its establishment.
There have been some missteps when it comes to providing affordable properties in Dubai, but the good news is that the government is trying, and will continue to try to make housing more readily available to those in the lower and middle-income brackets. Developers and investors also have the incentive to market towards lower and middle-income residents because they don’t want people fleeing Dubai to live in more affordable areas. They won’t be able to make money when people are spending it elsewhere, so hopefully we will soon be seeing an uprising in Dubai of housing developments that are truly affordable and accessible to the public.
We think that the government needs to place limits on how many units investors can buy in affordable off-plan property projects. For instance, whereas now some investors are buying whole floors of apartments in these housing pre-launches when they should only be able to purchase one housing unit per household. This way it will ensure that the “affordable housing” is going to the low and middle-income residents that need it the most.