Aqarat Dubai says 60% of Dubai developers building affordable homes
By Q3 2017, 60% of Dubai's top builders had launched affordable projects, thus influencing future trends in the home-finance product market, Aqarat Dubai says
Up to 60% of Dubai's top developers are said to be participating in the affordable property segment.
Consequently, the affordable-home buyer segment is a significant growth market for financiers in the UAE.
These were the findings of Aqarat Dubai, a home finance website in the UAE, which stated that by Q3 2017, "about 60% of top Dubai developers" had launched projects with affordable unit options, priced within the range of $109,000 and $190,600 (AED400,0000 and AED700,000).
"We believe that the next wave of successful home finance products is going to be directed towards first-time buyers for end-use purposes," the company said in a statement.
Aqarat Dubai found that 23% of its users who enquire about residential funding earn between $2,700 and $4,100 (AED10,000 and AED15,000) per month.
In a press statement, the firm said that this group "usually faces difficulties associated with the eligibility criteria based on the income bracket [...] and the ability to generate down payment" in terms of mortgage products.
The income of expats should not be less than $4,100.
"However, the UAE real estate market is demonstrating an extension of its property options towards the direction of affordability," the company continued in its statement.
Accordingly, the segment earning less than $5,450 (AED20,000) "should represent a large opportunity for home finance providers".
Key characteristics of the affordable-home buyer segment include intent, experience, and financial behaviour.
The segment is in the market for property purchase and is more likely to comprise first-time home buyers; and its income backet is not an indication of its ability to manage personal finances and risks, Aqarat Dubai explained.
These buyers would purchase for personal use, "and not for speculative purposes, demonstrating real market demand for UAE properties", the company's statement revealed.
It added: "Therefore, there is an entire market of potentially responsible first-time home buyers who are looking for affordable options and home finance solutions that will accommodate their current purchasing power.
"Such solutions might include rent-to-ownership solutions, where down payment is paid in installments and rent", and financial products that can assess risks in manner specific to first-time owners, the firm added.
Introducing "affordable and flexible" home finance options would be beneficial for home financiers, especially if these launches are timed to coincide with the completion of affordable property options in the UAE.
Dubai's property sector needs to start paying attention to, and developing for, the low-income segment, the chief executive officer of Jumeirah Golf Estates (JGE) told Construction Week this September.
Yousuf Kazim noted that while Dubai has no shortage of luxury projects and now has its share of developers targeting the mid-market segment, it doesn’t have enough housing products aimed at those belonging in the low-income bracket.
To support his statement, Kazim pointed out that there’s a large number of people who work in Dubai but live in other emirates like Ras Al Khaimah, Sharjah, and Fujairah.
"They go through heavy traffic every day, and it’s because their demand is not being fulfilled in Dubai," he said, adding that for the low-income residential market to be properly served, developers need to collaborate with the government.
"It’s very important that we consider how a product can be offered at a very attractive price and with the right payment plan," said Kazim.
"There needs to be a collaboration with the government, so we can look into charges and utilities. There needs to be a plan in place, because eventually one of the [biggest draws of these projects] would be the cost of living."
He added that local governments may even consider reducing certain project fees as an incentive for developers to cater to the low-income market, but admitted that at the end of the day, developers will still have to sacrifice on their margins.
Despite that, however, Kazim said that Jumeirah Golf Estates is not averse to entering the low-income market, revealing: "JGE is putting this in its future plans. There will definitely be plans to execute such type of projects."