Millennials in Dubai are increasingly getting onto the property bandwagon - and that's good news for the emirate's real estate sector in general and for certain up-and-coming suburbs in particular.
Born between the early 1980s and 2000, millennials account for almost half of Dubai's total population of 2.5 million (2015 data), according to the Dubai Statistics Centre.
With high disposable income, Dubai's millennials make up the bulk of first-time buyers, a fact that holds true more for Western and Arab expats than for Asians, who prefer to make their first property purchase in their home country.
Also known as Generation Y, these professionals are increasingly choosing to invest in Dubai property as a hedge against rental inflation, mostly opting for studios, one-bedroom apartments and townhouses, say experts.
"Young families show a preference for townhouses as there are gardens and rooms to expand should their personal circumstances dictate," said David Godchaux, CEO of CORE.
The launch of affordable townhouses such as Town Square by Nshama and in Jumeirah Village Triangle has certainly piqued the interest of millennials and first-time buyers. Other townhouse options on their radar include The Springs and Arabian Ranches Phase 2.
"Townhouses are very attractive for those with young children. Emaar's Mira development is one such good example of a new community. In some ways, it is what The Springs used to be five to seven years ago," said Sanjay Chimnani, managing director of Raine & Horne Dubai.
Property and community requirements vary for a couple with children and those without kids. While a young family is on the lookout for parks, communal pools and proximity to schools, singles and DINK (double income no kids) couples seek restaurants and the convenience of daily chores around their new abodes.
New homeowners are sticklers for some basic facilities in the building such as a pool, gym, parking, etc.
"Community facilities such as convenience retail, F&B, clinics, pharmacies, schools, salons as well as easy access to main highways are important factors in their consideration. In terms of floorplans, millennials look at efficient layouts with open kitchen rather than closed kitchens," according to Mansoor Ahmed, director of healthcare, education, development solutions and PPP at Colliers International Mena.
In terms of size, young people are looking for studios or one bedroom units. Most of them are price-conscious, so would be prepared to sacrifice on size in order to potentially pay less.
"This constitutes almost 60 to 70 per cent inventory of several new projects. Home sizes have also changed over time. A typical one-bedroom apartment seven to 10 years ago was 1,000 sq ft to 1,200 sq ft and these are now around 700 sq ft. This is more in line with big cities in international markets," added Raine & Horne's Chimnani.
Besides a way out of the rental trap, most millennials buy homes for investment purposes as well (think capital appreciation and rental returns).
Barometer of wealth
"Given a choice, most people's dream would be to own their property. But in Dubai, this is not necessarily possible. Property ownership is seen as a barometer of wealth, and young first-time buyers would prefer to buy an investment if they cannot afford an end-user property. There are also those who want to put roots down and get out of the rental trap, so the drivers are wealth building and/or owning one's home," explained Mario Volpi, chief sales officer, Kensington Exclusive Properties.
Meanwhile, with developers getting creative with post-handover payment plans, millennials and first-time buyers are seeing the benefits of committing EMI to a mortgage rather than wasting money on rent.
"Even if a person takes a five-year view of staying in Dubai, s/he will find it very attractive to own as opposed to rent. If the lending cap is reduced to 10 to 15 per cent down payment and 85 to 90 per cent mortgage as against 25:75 today as per central bank guidelines, end-user ownership would boom," suggested Chimnani.
"What has happened over the past two years is the formation of a growing pool of underlying demand because of the very high level of yields in Dubai. Some of this underlying demand is starting to translate into transactions as there is a perception that prices have or are starting to reach the bottom. This, in turn, is pushing more renters to move to ownership as there is anticipation that prices will progressively grow over the next few years," Core's Godchaux concluded.
