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Affordable housing in Dubai, a reality or a mirage?

Dubai – a city where the luxury and ultra-luxury constituent has been the main focus since the establishment of the freehold market in 2002, has received a wake-up call in its diverse social structure’s needs: the lack of affordable housing. Communities without affordable housing quickly become segregated by income and family background. In order to promote economic and social diversity, any community needs to provide for the needs of all families. Well-placed affordable housing developments allow communities to welcome a wide range of families and to create a vibrant, diverse, group of residents.

However, the concept of “affordable housing” is strange to most developers in Dubai, that cowered away from these types of developments for years, for various reasons from high land cost, lower quality of construction, faster depreciation, upkeep maintenance, lack of demand or perception issues. Moreover, banks in the UAE have limited financing options for granting mortgages for residents with a monthly income lower than 10,000-15,000 AED. All these factors comprised have made the Dubai government to take the first action steps towards the diversification of the real estate market, with Sheikh Hamdan bin Mohammed Al Maktoum, Crown Prince of Dubai, requiring the renovation of some of Dubai’s older areas, to cater to the needs of lower-income residents who are working in key sectors and have supported the economy and whose housing expenses cannot exceed 30-35% of the household income. This policy targets residents with a monthly income varying from 3000 to 10,000 AED.

The lack of affordable housing issue however can be addressed not only to the low-income end users, but to more than a quarter of the Dubai population as well. Many of the Dubai expats have been attracted with lucrative deals in terms of salary and accommodation allowances, yet there is a vast majority of service class executives such as accountants, administrative clerks, marketing executives and so on, whose salaries levels are ranging from 9000 to 20,000 AED and who struggle to find quality accommodation at feasible rental or sales prices. According to a Core Savills report, Dubai stands at par with London on high rent-to-income ratio, at about 40%, scoring lower than New York or Hong Kong, but better than Sydney.

A report by Core Savills shows that Dubai has picked up the pace towards the affordable housing trend, as more developers now have turned their attention to this type of segment with a total delivered stock of 40% in the low and mid-market category in the first quarter of 2017. Most of the new home handovers are taking place in communities such as Dubailand, Jumeirah Village, Al Furjan, Discovery Gardens or Sillicon Oasis.

The general rule of thumb regarding how much of an income should be allotted for rent is 30%. For many families, 30% of their income isn’t enough to afford a place to live in Dubai and they need to spend more than that. Let’s have a look at the most expensive and cheapest places to live in Dubai.

The most expensive areas to live in Dubai remain the Downtown/ Burj Khalifa area where one bedroom apartment rents for 170,000 AED yearly, Palm Jumeirah with an average cost of 120,000-150,000 AED per year, followed by DIFC, JBR and Dubai Marina.

The most affordable communities in Dubai are International City, where one bedroom apartment rents for 48,500 per year, Deira 45,000 AED per year for one bedroom apartment and Jumeriah Village with a yearly rent of 47,000 AED for the same unit.

According to a monitoring by Al Ruwad Real Estate, most of the projects launched during the first quarter of this year are primarily aimed at middle income customers and buyers, as a suitable solution to eliminate the annual rent burdens. This category represents more than 65% of the total number of residents and expatriates in Dubai, that are now being offered more viable options in terms of finding the most suitable place of residence.

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