The governments of Abu Dhabi and Dubai must urgently act to stop middle-income workers being priced out of the housing market, a new report has found.
According to the property broker JLL, middle-income workers who perform vital jobs for the economy are being squeezed by high housing rents and prices.
The report found that middle-income families in the UAE can afford to pay annual rents of up to Dh72,000 or mortgages on houses worth Dh790,000.
Coming out on the eve of Cityscape Global 2015, which showcases hundreds of glitzy off-plan apartments to be built in Dubai, the report said that only 22 per cent of new homes launched so fat this year in Dubai could be classed as affordable to middle-income households.
According to JLL’s definition, which includes the middle third of all earners nationally, there are more than 820,000 middle-income households in the UAE, representing almost 40 per cent of the population.
JLL’s rival property broker Cluttons said last month that the average annual rent in Abu Dhabi stands at Dh204,000 per property, while the average annual expatriate income is Dh199,000.
Despite the market slowdown in Dubai and some moves by the governments to reduce costs for low earners, JLL researchers found that much more needs to be done to alleviate the crisis.
This includes providing developers with access to affordable land, reducing the costs of infrastructure for affordable housing projects, promoting industrial approaches to construction and large-scale procurement processes, adapting developers’ business models to make building affordable homes seem more attractive, improving access to mortgage finance and regulating the delivery of affordable homes.
A lack of affordable housing is not just a problem for the UAE. According to JLL, countries across the Middle East are suffering from the social and economic impacts of a lack of affordable housing.
JLL in 2011 identified the need for an additional 3.5 million affordable homes across the region, a figure it said would have increased significantly over the past four years.
It also highlighted Saudi Arabia and Egypt as suffering for a lack of suitable housing stock.
In Saudi Arabia, JLL said an affordable sale price for homes would be about 450,000 Saudi riyals (Dh440,700) and an affordable annual rent would be about 47, 000 riyals.
In Egypt, the affordable sale price was 285,000 Egyptian pounds (Dh133,700) and annual rent was about 32,000 pounds.
“Governments around the region have started to allocate significant financial resources to encourage more development of middle-income housing, but more needs to be done,” said Craig Plumb, the head of research at JLL’s Dubai office.
“We believe there is a need to rethink the existing relationship between government and the real estate development industry to create more affordable housing that middle-income families can afford.”
“We also recommend more innovative planning and design initiatives to create more attractive, environmentally sustainable and cohesive communities as well as accessible financing, empowering middle income families to take a stake in their future,” he added.
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