Lack of affordable homes pushing away Dubai expats
A lack of affordable homes in Dubai is forcing the Emirate's expats to move to the city's outskirts, or neighbouring Emirate Sharjah, in a trend which property experts claim employers will have to prepare themselves for
A shortage of affordable homes and a reduction in overseas allowances since the financial crisis are pushing foreign staff on middle incomes out to less glamorous areas of Dubai, far from the office, or to neighbouring Emirate Sharjah.
Investment bankers, lawyers and top managers at multinationals may enjoy seven-figure salaries but other expats - besides architects, accountants and IT managers to legal secretaries and HR executives - are often on household incomes of $2,720-$8,170 (AED10,000-30,000) a month, property consultants JLL said.
JLL added the latter can afford annual rents of $19,600 (AED72,000), or could buy a property for around $215,109 (AED790,000), "a fraction of prices in expatriate neighbourhoods Dubai Marina and Dubai Downtown, for example, where two-bedroom apartments sell for up to $1m (AED4m)", Reuters reported.
"There's a squeeze on middle-income earners," said Faisal Durrani, head of research at property consultancy Cluttons, said.
"Affordability issues are likely to become more acute," Durrani added.
The only districts offering affordable accommodation for many middle-income earners are rundown areas near Dubai's creek and parts of the city's outskirts, such as International City and Dubai Outsource Zone, the report continued.
As expats move out of more central areas, previously cheaper suburbs have experienced the biggest rental increases.
In 2015, developers have launched new projects totalling 19,500 homes, of which JLL estimates only 22% would meet its definition of affordable for the middle-income bracket.
About 70,000 new homes in total are due to be completed in Dubai by the end of 2018, more than double the number in 2013-14, but below a 2007-2008 peak of 90,000, CBRE estimates.
"These units are not being completed at such a quick rate so we see a major negative impact on the rental market," said Mat Green, research head at CBRE Middle East, according to Reuters.
Many employers in the emirate have done away with housing allowances and slashed overall remuneration in the wake of the 2007/08 financial crisis but may have to reevaluate those packages if they want to retain the same calibre of talent."
Dana Salbak, JLL research manager, added: "The need for affordable housing will become more pronounced.
"Employers will have to increase wages or housing allowances to attract and retain staff."
Some residents have moved to conservative neighbour Sharjah.
Property prices are less than half those in Dubai, Cluttons estimates, and late last year Sharjah allowed foreign UAE residents to buy property in some developments.
However, it is more than an hour's drive away in rush hour from Dubai and lacks the dining, shopping and nightlife that its neighbour offers.
CBRE's Green says Dubai should prioritise build-to-lease projects whereby the Emirate's developers, the largest of which are state-owned, retain ownership and lease units out to tenants to keep rents at affordable rates, the report continued.
"But developers are commercial entities with responsibilities to their shareholders to deliver profit and dividends," he said, and thus so far have not favoured such schemes.