Mid-income property shortage calls for govt intervention
The shortage of supply for mid-income properties in Dubai can only be resolved through government intervention, according to a Dubai-based real estate advisory and marketing company, RichVille Advisory Group.
It suggests three measures the government could introduce to boost supply. The first is that government (or government-owned companies) builds mid-income properties and rents them out at a subsidised rate. The second is that the government provides development land to developers at a very low cost (under Dh50 per sq ft) and subsidises the cost of construction material.
The third measure the advisory group suggests is that the government subsidises the mortgage interest or profit rates to allow mid-income buyers to afford buying these properties. "The current profit/interest rates are relatively high resulting in higher monthly payments," says RichVille in a recent updated report on the Dubai real estate market.
"Without these measures, it will not be feasible for developers to develop mid-income properties," the company says, adding that the problem will continue and become more complicated. Although developments such as International City and Discovery Gardens have provided some relief to this market segment the problem is becoming more acute.
One of the reasons for this is that dramatic increases in construction costs over the past two years have pushed up the price of any new mid-income development making it more expensive than high-properties launched over the past three years, explains RichVille.
The advisory firm projects that about 300,000 residential units will come onto the market between the end of 2006 and the end of 2010, even the number of units projected to be launched is 500,000. "Due to expected project delays we estimate that only 60 per cent of these projects will actually be completed by the end of 2010," it says.
Among other observations made by RichVille is that demand for property in Dubai has shifted from speculators to end buyers including property users and long-term investors. It also expects an increase in the number of foreign investors coming to Dubai looking for mid-to long-term returns.
The increased demand for development properties over the past few months has also lead to an average increase of 25 per cent in prices in some areas like Business Bay, Culture Village and Dubai Marina, observes the property advisory firm. It also says there has been a "huge shift to investing in offices instead of residential properties".
It dismisses talk of a "property bubble" in Dubai as a myth but does not "rule out small market corrections here and there". "Dubai's continued growth is guaranteed for the next 15 years at least," it predicts.
Separately, in another report on Dubai's real estate sector by Dubai Chamber of Commerce and Industry (DCCI), it is suggested that a rent cap of 10 per cent in the medium term makes sense, according to its market analysis. It also says that Dubai's real estate market will not cool down for at least five years, "assuming that the government has done nothing to promote the demand and supply of real estate." Source
It suggests three measures the government could introduce to boost supply. The first is that government (or government-owned companies) builds mid-income properties and rents them out at a subsidised rate. The second is that the government provides development land to developers at a very low cost (under Dh50 per sq ft) and subsidises the cost of construction material.
The third measure the advisory group suggests is that the government subsidises the mortgage interest or profit rates to allow mid-income buyers to afford buying these properties. "The current profit/interest rates are relatively high resulting in higher monthly payments," says RichVille in a recent updated report on the Dubai real estate market.
"Without these measures, it will not be feasible for developers to develop mid-income properties," the company says, adding that the problem will continue and become more complicated. Although developments such as International City and Discovery Gardens have provided some relief to this market segment the problem is becoming more acute.
One of the reasons for this is that dramatic increases in construction costs over the past two years have pushed up the price of any new mid-income development making it more expensive than high-properties launched over the past three years, explains RichVille.
The advisory firm projects that about 300,000 residential units will come onto the market between the end of 2006 and the end of 2010, even the number of units projected to be launched is 500,000. "Due to expected project delays we estimate that only 60 per cent of these projects will actually be completed by the end of 2010," it says.
Among other observations made by RichVille is that demand for property in Dubai has shifted from speculators to end buyers including property users and long-term investors. It also expects an increase in the number of foreign investors coming to Dubai looking for mid-to long-term returns.
The increased demand for development properties over the past few months has also lead to an average increase of 25 per cent in prices in some areas like Business Bay, Culture Village and Dubai Marina, observes the property advisory firm. It also says there has been a "huge shift to investing in offices instead of residential properties".
It dismisses talk of a "property bubble" in Dubai as a myth but does not "rule out small market corrections here and there". "Dubai's continued growth is guaranteed for the next 15 years at least," it predicts.
Separately, in another report on Dubai's real estate sector by Dubai Chamber of Commerce and Industry (DCCI), it is suggested that a rent cap of 10 per cent in the medium term makes sense, according to its market analysis. It also says that Dubai's real estate market will not cool down for at least five years, "assuming that the government has done nothing to promote the demand and supply of real estate." Source
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