An affordability gap exists in Dubai's real estate market and needs to be addressed by the construction of more mid-market homes, property consultants Colliers International said on Monday.
Its new report reveals a mismatch between the demand for and supply of appropriate mid-market property.
The study reveals that 50 percent of Dubai households earn between AED9,000-15,000 per month. Following internationally accepted standards of what a household can "afford" to spend every month on accommodation, this limits rental or mortgage repayments to AED32,500-54,000 per annum.
Despite the size of this market, Colliers research points to not only the lack of housing at this price level but also the lack appropriate housing, with households in this income bracket restricted to studios or one bedroom units in International City, Deira, Al Qusais and Al Nahda.
Ian Albert, regional director at Colliers International said: "When we talk about affordable housing in Dubai we are not referring to low-income housing, but rather housing that is affordable for a household in relation to its income. What this means in the Dubai market is mid-market properties that are suitable for young working families or professionals.
"Owing to the recent growth in rental and sales prices in Dubai, this market segment has chosen to live in neighbouring emirates such as Sharjah and Ajman where greater options are available to them.
"This is not only a missed opportunity for Dubai developers who should be looking to capture this sizeable market by creating affordable communities that cater to its needs, but it also directly affects the economy as productivity levels are lowered when a large percentage of the workforce suffers from a long commute."
The report details the substantial net gains to be made by developing affordable communities. It also asserts that when developed effectively, affordable housing can provide high returns for investors.
Albert added: "Although the rate of growth in the sales market has slowed, the average 2 or 3 bedroom unit in Dubai is still beyond the reach of most working families.
"With home ownership no longer an option, these families have been pushed towards the rental market where prices remain high. This represents significant challenges for Dubai. As the cost of living and raising a family becomes untenable for your average family, at best they will look to a neighbouring emirate for accommodation and schooling, and at worst they will look to more attractive, affordable countries in the gulf or further afield," he said.
An Asteco report said last week that the trend for Dubai residents to search for more affordable accommodation in neighbouring Northern Emirates appears to be slowing down.
It said that a slowdown in Dubai's market is resulting in a softening in demand for competitively-priced residential rental units in the Northern Emirates.
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