A shortage of affordable homes in Dubai and a reduction in overseas allowances since the financial crisis are pushing foreign staff on middle incomes out to less glamorous areas of the city far from the office, or to neighboring Sharjah, a report said.
Investment bankers, lawyers and top managers at multinationals may enjoy seven-figure salaries but other expats–from architects, accountants and IT managers to legal secretaries and HR executives–are often on household incomes of Dh10,000-30,000 ($2,720-$8,170) a month, says property consultants JLL, Reuters reported.
They can afford annual rents of Dh72,000 ($19,600), says JLL, or could buy a property for around Dh790,000–a fraction of prices in expatriate neighborhoods Dubai Marina and Dubai Downtown, for example, where two-bedroom apartments sell for up to Dh4 million.
“There’s a squeeze on middle-income earners,” said Faisal Durrani, head of research at property consultancy Cluttons. “Affordability issues are likely to become more acute.”
The emirate’s real estate sector has been among the most volatile globally over the past decade as it turned from boom to bust to boom again. Property prices, and rents, have steadied in the past year but are still 50% higher than two years ago, according to estate agent Cluttons, and are expected to be on the rise again by 2017 as Dubai prepares to host the EXPO 2020.
The only districts offering affordable accommodation for many middle-income earners are run-down areas near Dubai’s creek and parts of the city’s outskirts, such as International City and Dubai Outsource Zone.
But as expats move out of more central areas, previously cheaper suburbs have experienced the biggest rental increases.
Land a Commodity?
Land is traded like a commodity in Dubai, inflating prices. This has pushed developers to focus on high-margin luxury projects–middle-range apartment blocks are difficult to make a profit on without subsidized land.
This year developers have launched new projects totaling 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.
Sharjah Option
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 caliber of talent. “The need for affordable housing will become more pronounced,” said Dana Salbak, JLL research manager. “Employers will have to increase wages or housing allowances to attract and retain staff.”
Some residents have moved to conservative neighbor 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 neighbor offers.
