A shift in buyer profile - Hamptons International

Dubai’s property sector is today witnessing an unprecedented trend. For the first time, the market has readily opened up to the middle income investors, who have monthly average incomes in the range of AED 15,000 to 20,000 and above, offering them a healthy opportunity to buy their own homes in the Emirate.

This has led to a new shift in buyer profile. It offers a strong platform for residents, particularly expatriates, to shift from a rental model of living to own homes at very competitive rates.

Credit for this transformation goes to all the different stakeholders in the industry. While regulatory agencies have set impactful measures to curb unhealthy speculation, the government has also been highlighting the need for the market to have affordable homes that meet the needs of the majority. Developers have responded to this with the launch of projects that fit the pockets of the middle income investors.

This is indeed a sign the Dubai property sector maturing. Let us look at the historic trends: When the freehold era commenced in Dubai, there was an overwhelming demand from residents, especially expatriates. But the higher price range meant that these projects appealed mostly to high-income investors.

Over the years, strong regulatory measures were introduced that weeded out unhealthy speculation. Secondly, with the streamlining of mortgage finance, Dubai’s property sector emerged stronger and came to be regarded as a safe investment haven.

However, the supply line continued to be still in favour of luxury projects. Hamptons International estimates that over 20,000 new residential units will have entered the supply pipeline this year taking the total number of housing supply to about 450,000 by the end of 2015. However most of these units fall still within the ‘luxury’ development bracket.

The market trend for luxury projects has been relatively static in the past months. There is no heavy spike in demand nor is there is a dramatic dip. This is because the investment decisions of high net worth individuals differ from those in the traditional market, mainly due to their ability to wait-out short-term market fluctuations. They see long-term value in investing in Dubai, which is today regarded as a safe investment destination. They will continue to invest in Dubai, given the city’s strong economic fundamentals and the ongoing preparations for the Dubai Expo 2020.

For the middle-income professionals and families, the opportunity for making a long-term investment has now come with the launch of several affordable projects such as the ones launched by Nshama.

The highly competitive price points offered by such developers appeal to professionals and families who can move from their existing rental model to an own home.

With a salary of AED 20,000 monthly, a middle-income professional can now pay a total mortgage of approx. AED 1 million with payments of just below AED 5,000 per month. For nearly a quarter of their income – a significant part of which already goes into paying rent – a small family can make a judicious investment into their future.

Based on the feedback from our extensive customer base, we have observed that investor preference for affordable communities that are currently being developed is led by several factors including the “integrated community approach.”

People thoroughly research the projects and they study the developer’s reputation, location, surrounding communities, access, public transport links, design, amenities, price and payment plans before making an investment decision.

The maturing of Dubai’s property market with properties ‘staying in the market’ for longer periods also means customers now have the option of making informed purchase decision. The hectic pace of buying that once characterised the market has given way to a steadier pace. This is healthy for all stakeholders.

Developers now are assured of end-use or long-term investors, while customers have greater freedom and flexibility in their purchase decision. For finance providers, a mature market means lesser risk as they deal with serious investors who are in for the long-term.

The benefits of a stronger affordable property market are multiple. There will be strong influences on both retail and hospitality sectors as people will have greater disposable incomes. It will bring sustainable returns for the economy in addition to giving investors the ‘sense of belonging’ to the city.

Today a large portion of the salaries of middle income professionals goes into rent – which ultimately does not help their financial well-being. But shifting to an owned home, will mean that the money spend on a mortgage, will turn into an asset as well.

The shift to affordable homes will also potentially influence rental patterns in the long run. While rents continue to hold firm in key locations, an increasing share of property ownership – particularly by the middle income professionals – will influence rental patterns in due course. This will become more evident once the mid-income projects are delivered – with several of them expected to come online towards end-2016 and during 2017.

Several developers are looking at entering the affordable segment in order to reach a wider target audience. But we believe this will not potentially lead to a supply glut. Today, the property market is clearly streamlined. Every developer, no matter the price range of their development, has to abide by all regulations including the opening of Escrow Accounts and adhering to Transfer Fees. This has already deterred speculators from entering the fray.

Furthermore, Dubai’s growth in population – particularly in the number of middle income professionals – will continue to sustain the demand tempo for affordable homes.

While the new trend is positive, it is important for every one do their research on the property market before making an investment decision. We provide in-depth insights on every project, detailing advantages and disadvantages, and guide customers through the purchase process. There is a great opportunity for people to own a home in Dubai that fits their budget. They must use it wisely and make an informed decision that will assure them long-term returns.

Source: Property Weekly

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