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22 December, 2016
When it comes to property, location matters, but affordability matters too. That’s a lesson being learned by home builders in Dubai, who are now starting to respond to market demand for more affordable homes.
Buyers want homes at a price they can afford
While the traditional golden rule of the housing industry has long been “location, location, location”, over recent years, the concept of affordability has been quickly catching up. Modern multifunctional furniture and the move to digital technology have made it increasingly practical for people to live in smaller spaces. As smaller housing units require both less space and less materials and labour to construct, they can be sold at more affordable prices and this sector of the market has been proving very popular in Dubai.
Lower prices but plenty of buyer interest
While average prices of property for sale in Dubai have fallen 4% as compared to 2015, there are encouraging signs that the market is smoothing out and may be on its way to a sustainable upturn. The Dubai Marina area, which has seen significant year on year price drops, appears to have stabilized, as have JBR, DIFC and Greens. Activity in communities such as Mudon and the Springs have even seen prices start to pick up again with 1% and 5% rises respectively. Even though “mid-range” homes in the AED2M to AED5M price bracket are still attracting a decent degree of interest from buyers, the sector with by far the most activity is the AED1M and under price bracket. This tallies both with the indications that buyers are looking for smaller, more affordable homes and also with the fact that landlords are looking for properties which can be profitably let out to tenants at the budget end of the market.
The rental market remains steady
Overall the rental market has stayed on a fairly smooth track, although even here there have been some minor fluctuations, which are in keeping with the property market as a whole. Business Bay suffered the biggest quarter on quarter drop in rents at 5% and rents for larger properties such as villas dropped by 1%. In spite of this, however, rents in Jumeirah Village Circle and Dubai Sports City actually saw modest, but encouraging, increases of 2% and 3% respectively. Here again, the busiest area of the market has been the affordable housing sector, with tenants particularly interested in smaller apartments and/or lower-priced communities.
Rounding off the year
Over this past year a number of factors have combined to curtail growth in the UAE property investment market. The two main factors, however, appear to have been off-plan sales and the push towards smaller units with lower prices. Although off-plan sales are a fairly standard feature of the Dubai property market, they have been quite numerous this year and have attracted buyers with time to spare away from completed communities. Likewise the push towards smaller, more affordable, units is clearly going to have an impact on average house prices, however if builders continue to respond to this demand appropriately, there will still be profits to be made on a combination of sales margin and transaction volume. Overall the Dubai property market looks set to see modest growth of around 4% over the coming year.
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