8 September 2015
Dubai: Size Matters
As Dubai continues to roll out developments fueling the expansion of the city, there has been pressure on developers to build affordable homes to support the middle-income groups (earners between 3k-10k AED). In the last year, a flurry of new projects has been launched to cater to this segment.
As the markets have matured and slowed down, developers have catered to affordability, more often by reducing the size of the apartments, rather than the per square foot rates both in developed and developing communities. There has also been an increasing incidence of bigger balcony spaces in some of these developments.
An analysis across both the villa and apartment segments shows an up to 20% reduction in sizes between existing supply and new project launches. This trend was witnessed within, as well as across communities; and is a trend that appears to be accelerating.
Dubai’s price curve reveals an investor preference for smaller units, as investors inquire units with higher yields. Whereas in Manhattan, the upward sloping price curve per square foot reflects higher end user demand for larger living spaces. As the market matures, a similar trend is expected to be witnessed in Dubai as well.
We opine that the reduction in living spaces partly explains the reason that end user demand has not been ignited in response to the recent flurry of “affordable launches”. In the event that markets remain sluggish, we opine that there is a considerable opportunity for developers to tap into this segment by offering lower per square foot rates with larger living spaces, thereby paving the way for the affordable housing segment to flourish.
To download the full report click here: http://content.reidin.com/PublicReport/ae1509.pdf