Brokerages can no longer ignore the influx of new supply, especially in the affordable space
We have studied our client demographic in great detail to analyze who is occupying these newly handed over units, which community they have moved from and their reason for moving. This allows us to map out client sentiment, how we feel the market will shift in the years to come and which areas to focus on. What we have found is very interesting.
Rental demand
The vast majority of 3-bedroom + maid’s townhouses in the new areas surrounding the Al Qudra stretch start at between AED 95,000 – 105,000. This is the price of a small 1-bedroom apartment in Dubai Marina, Palm Jumeirah and Downtown Dubai. While many people will argue that they are completely different offerings in very different locations, which I would be inclined to agree with, what we are actually seeing is a large proportion of tenants migrating from these very areas. People are choosing to take a slightly longer commute to enjoy modern villa living, home sizes of more than double and in some cases have world-class amenities such as golf courses, skate parks and ample pet/child-friendly areas.
Sales demand
With end-user sentiment following the above trend, what we have also seen is that investors are flooding into the communities to capitalise on high yields, not seen anywhere else in Dubai. Capital appreciation is a sentiment of years gone by and with all indicators pointing towards no turn in sight, investors are choosing to capitalise on strong RoIs, especially in the affordable townhouse communities such as Town Square, Mudon and Mira, which account for the top three highest gross yields of any community in Dubai. The previous benefit of receiving a low yield in a prime area to benefit from strong capital appreciation is a thing of the past.
Expats typically accustomed to townhouse and villa communities are embracing the in-land commute. With the average commute of Western Europe at 38 minutes, the 20-minute commute from office hubs such as Media City is no longer seen as a lengthy burden.
Developers are also embracing the shift towards affordable housing located on the periphery of the City, with Meraas recently launching Cherrywoods, Emaar launching Arabian Ranches 3 and Dubai Properties continuously pushing new Arabella and Villanova phases.
There has been a clear market shift. Reem, Town Square, Dubai Hills and Mudon cover the top four most searched townhouse communities. We foresee tenant migration will continue out of the core areas previously propping up the market. As further communities hand over, this will only increase the pressure on decreasing rental prices of prime areas, leading to landlords having to drop prices to stay competitive. Demand for areas such as Dubai Marina will always be high as it offers a convenient lifestyle not available anywhere else, however, it will not enjoy the market monopoly it once did and a new market medium will have to be found. Brokerages in the market can no longer continue to ignore the influx of new supply, especially in the affordable sector as it caters to a segment of the market that has never previously existed until recent years. Companies that choose to ignore market trends will suffer; following demand is how to be successful in today’s market.
ARON LOMAX
Managing Partner, Treo Homes
