My late grandfather once shared an important piece of financial advice with me: “When in doubt, put your money in bricks and mortar.” Those words have stayed with me ever since.
But while buying rather than renting is the norm in many countries, a quick look at my own group of friends reveals we all have three things in common: we have chosen to call the UAE home. We feel we are paying too much in rent. We have yet to buy a home here.
The National’s recent YouGov poll found half of employed expatriates would consider leaving because of high living costs. Meanwhile, research by Colliers International found that half of Dubai residents earn between Dh9,000 and 15,000 per month, greatly limiting their housing options.
“When we talk about affordable housing in Dubai, we are not referring to low-income housing, but rather housing that is affordable for a household in relation to its income,” explains Ian Albert, regional director at Colliers International, and specifically “mid-market properties that are suitable for young working families or professionals”.
Recent evidence suggests the tide may be turning, as evidenced by the Government’s plan to build hundreds of low-cost properties in Abu Dhabi and by discussions in Dubai about whether to introduce affordable housing quotas as a condition for new developments.
Private firms are also realising there’s a market for affordable homes. But while their intervention is positive, there is also a significant problem in the way these properties are sold.
When one such development launched recently in Dubai, crowd control barriers were erected to contain the queue. And this was not just any queue, it was by invitation only.
If you were lucky enough to get in the door before the phase sold out you would be given property floor plans and prices. Interested? You have two choices. Pay 10 per cent of the property price upfront plus fees. Or leave.
The demand is there, of course, so it’s to be expected that developers want to capitalise on it. But you have to ask, who wants to buy their “forever family home” this way? I’d wager very few people.
Add to that the fact that young families and first-time buyers are among the least likely to be able to produce that sort of cash quickly. Or that, should they sign a purchase contract, they’ll need to pay for the property before completion, all while renting somewhere to live. The harsh reality is that many are left empty-handed.
While the problems may be clear, the solutions are less so, especially in a tax-free country like the UAE. While subsidised affordable housing for expatriates is out of the question, there are a few international examples that could help target young families and middle-income workers.
In some markets, affordable housing is ring-fenced for purchase by those in certain income brackets.
In others, anyone can benefit from cheap purchase prices on one proviso: they are obliged by law to pay forward the initial savings when renting or selling the property later. While neither is a perfect solution, both would act to curb the speculation that can be so off-putting to market newcomers.
We also need to accept that those struggling to get on the property ladder aren’t in a position to pay both rent and a mortgage for years as developers offset their investment against building costs. Deferring payment at the construction stage, or withholding properties for sale until completion, is a necessity, albeit a controversial one.
The demand may be there but, under the current limitations, an affordable home of one’s own remains accessible to only the few. We all stand to benefit from a more mature and varied property market. To get there, it’s time for the developers to put their money where their mouths are.
Jennifer Gibson is a writer and broadcaster based in Dubai
On Twitter: @JennJGibson