More than 80 per cent of business leaders in the UAE believe that the country’s economy would benefit from more affordable residential and commercial property.
A poll of more than 500 executives carried out for The National by research company Borderless Access found that 83 per cent agreed that "better affordability in the UAE’s residential and commercial sectors will support businesses and the economy in both the short and long term".
A little over a third of respondents said they strongly agreed, while a little under half said they agreed but not strongly.
Another 17 per cent disagreed with the statement.
Asma Dakkak, the research manager at JLL Mena, said that the shortage of affordable housing poses a problem from "both a social and economic perspective" and was a threat to the long-term stability and the economic competitiveness of the country.
Fortunately, the government "recognises the seriousness of the matter and has implemented policies and programmes to tackle this problem".
Dima Isshak, the head of research and advisory at Chestertons Mena, said that the definition of affordable housing internationally is that no more than 30 per cent of household income is spent on housing; in the UAE the amount being spent on average is closer to 40 per cent.
She said there were pros and cons to developing affordable housing.
Overall, she said it should be seen as a benefit as the more people who invest in buying their own property, the more money circulates in the local economy.
However, one of the disadvantages is that expat visas are linked to employer sponsorships and people who lose jobs – and who are the people most likely to be paying mortgages – often have their bank accounts frozen as soon as their employment ends. This not only creates pressure on the homeowner but also the financial institution that provided the mortgage.
Over the past two years, there has been a significant shift in the residential property market towards the affordable segment.
Sameer Lakhani, the managing director of research firm Global Capital Partners, said that 78 per cent of off-plan properties under construction in Dubai have a price tag of less than Dh2m, and that more recently developers have been focusing on the sub-Dh1m market. More than half – 51 per cent – of off-plan apartments currently being built in Dubai have a price tag under Dh1m. The bulk of these are being built by companies that had previously focused on luxury properties, including Nakheel, Deyaar and Damac.
"In 2014, we said Dubai was a top-heavy market.
"It’s still a top-heavy market but you are starting to see developers responding.
"First they did it with payment plans and now you are seeing it with actual prices," Mr Lakhani said.
This has typically been done by creating new communities in more distant parts of the city where land costs are lower.
Ms. Isshak said that developers had become better at building homes for end users, creating properties for families with more space. She also said affordable homes remained attractive to investors because they offer high rental yields.
However, David Godchaux, the chief executive of CORE, said there could be "absorption issues" within some affordable communities because of the sheer number of homes being built.
It expects 20,000 to come to market within the next 12 months – 90 per cent of which are apartments.
"I think a bit of affordable housing is good [but] there is way too much of it being built. There will be a few horror stories in a few years."
The biggest danger, he said, would be in communities that do not find enough buyers, meaning that owners’ associations face the prospect of imposing high service charges to cover costs.