Rising rents and a lack of affordable housing in Dubai is starting to cause some concerns according to real estate experts in the emirate.
The latest figures compiled by property consultants CBRE Middle East shows that residential rents have increased by an average of 22% in the last 12 months. Apartment rents are up by 29% year on year and villa rents by 15%, the firm’s latest report shows.
Head of research and consultancy for CBRE Middle East, rentals have increased by an average of 45% percent in the past two years and those who cannot afford to rent in Dubai could be forced to look further afield in Sharjah and the Northern Emirates.
John Stevens, of real estate services company Asteco, said that the continued rise in rents could herald the start of a flight to affordability for budget sensitive Dubai residents. He also predicted they would consider relocating to Sharjah, Ajman or further afield in the Northern Emirates.
The CBRE report said the strongest sub-markets for apartments were Dubai Sports City, Downtown Dubai, JBR, International City and Dubai Silicon Oasis. For villas the best performing markets were Al Warqa and Springs.
‘Dubai’s residential sector continues to experience growing demand from both occupation and transactional sources. Despite recent regulatory changes, both rental and sales prices continue to rise, albeit at a marginally slower rate than was recorded during the previous quarter,’ Green said.
Report points out that while the residential development pipeline is again starting to swell, the number of upcoming projects was still too small and further down the line supply could again start to exceed demand.
‘During 2014, close to 17,000 new units are expected to be completed with the majority of these set to be delivered in secondary locations such as Dubailand, Jumeirah Village Circle and Silicon Oasis. Over the next four years roughly 65,000 new units are penned for completion, with 83% of these apartments,’ Green explained.
He also predicted that residential rental and sales growth would continue throughout 2014, though with growth levels lower than 2013 as affordability becomes a more influential driver of the market.
A new piece of research shows that Dubai urgently needs more than 260,000 new affordable homes to be built over the next six years. The research, commissioned by urban design consultancy Placemaking, found that currently about 50,000 new units were being added to Dubai’s housing stock each year across all price levels, with about 375,000 units added to the market between 2003 and 2013 and 20,000 more estimated for 2014.
However, Placemaking founder, Nadine Bitar, said that population growth, regional immigration to Dubai and the effect of Expo 2020 mean that more than 500,000 new units are needed between now and 2020.
Nadine said of those an estimated 264,000 needed to be affordable, which she defined as costing AED 45,000 to AED 60,000 a year in rent. But she pointed out that market demand before the 2008 financial crisis led to more stock in the upper end.
Nadine said possible solutions to boost the number of affordable homes included specific zoning to ensure a percentage of units were dedicated to affordable housing, as well as other incentives such as dispensation on parking bay numbers and an increase in plot ratio.
She added on the financing side, lower interest rate loans through banks or the government for these type of projects was another possible incentive.
She called for a high level, multi agency government committee similar to one created to progress the Dubai smart city concept to be established to tackle the issue.