PC: Arabian Gulf Business Insight
The affordable housing deals in Dubai have been dwindling gradually over the past six years. Many developers have focused on the higher end as it is affected by the living cost and increased cost of the land.
The sales of properties priced below AED 1m ($272,000) have plummeted drastically since peaking in 2018, Fäm Properties says. Affordable housing accounted for almost 46pc of all residential transactions during the third quarter of 2018, but it slipped to 29pc in the third quarter of 2024.
At the same time, the mid-range segment, which ranges from AED 1 million to AED 3 million, has shown improvement. Transactions from this category grew from 39 percent of all such cases recorded in Q3 2018 to reach 49 percent as of September 2024.
High-Value Markets Focus for Developers
Firas Al Msaddi, CEO at Fäm Properties, links the shift to developers’ growing interest in the higher-end market segments. “Many developers who have enjoyed success in the affordable housing sector have turned their attention to the upper market segments in order to expand, and boost their brand,” Al Msaddi explains.
“Developers are seeing better returns if they were to build mid- and high-end properties in prime areas,” says Imran Sheikh, partner at BlackOak Real Estate. Overall, on that note, leading developers such as Danube and Binghatti have shifted focus accordingly.
For instance, Danube launched its 101-story tower in Business Bay in January with a price of starting a studio at AED 1.2 million. By the end of September, 80 percent of units in the still-under-construction tower, Bayz101, had already been sold. The same holds for Binghatti that is trying to access the branded residences market by partnering with luxury brands Bugatti, Mercedes-Benz, and Jacob & Co.
Impact of Land Prices and Limited Affordability
One of the most fundamental factors that have led to a move away from affordable housing has been increasing land prices in Dubai. According to Al Msaddi, land prices in the Dubai Canal area have increased to AED 2,000 per square foot from AED 400 per square foot. This increase has forced developers to hike the property price as well because their focus has now more on high-end projects and branded residences.
This happens to the more modest villa plots in previously affordable territories like Jumeirah Village Circle, Al Furjan, and Maritime City.
The loss of such houses to more expensive housing is compounded for lower-income residents by limited financial resources. Imran Sheikh noted that although mortgages can be cheaper than rent in many places, many affordable housing residents don’t qualify for mortgages because of their financial situations.
Demand by Rich Expats and All-Time High Prices
Moreover, this influx of wealthy expatriates has created demand for more expensive projects. Prices then soared for properties. As of last August, according to ValuStrat, the average price for residential property in Dubai now stood at a record AED1,490 per square foot. Meanwhile, the average size of sold residences is at its historical record low, with 1,450 square feet, and being the afflicted affordability issue for many buyers.
This summarises that developers’ shift in focus, land price rise, and requirement from wealthier buyers have progressively decreased the sales of affordable housing in Dubai for the past six years.
