Affordable property has recently become the most talked about segment of the Dubai’s property market. Developers "optimize" their approach and decide to bet on quantity in order to bring record-low-priced apartments to the market. But what is the price of such pricing?
The launch of the first phase apartments at The Pulse project by Damac on October 1 became that event that pulled the trigger an excited a vivid discussion on how the property affordability is reached in such developments. The cheapest studios in that project went on sale at a record low price of AED 280,000, which is significantly lower than other developers’ offers in the rest of the city areas. Even companies like Danube being almost a pioneer of affordable housing development in Dubai failed to reduce the price for its properties below AED 430,000 for the cheapest studio in the Starz project in Al Furjan. And this is despite all savings Danube has made by supplying goods from their own building materials business at cost.
So what is the secret behind such a breakthrough in lowering the price? The secret is simple: it’s just a significant reduction in size of properties. Of course, the cost of land is also of a highest importance in affordable housing pricing, and land plots are truly much cheaper in remote areas such as Al Furjan and Dubai South. Indeed, out of 5,579 homes having entered the market in the third quarter of 2016, 81 per cent were handed over in Dubailand, Dubai Silicon Oasis and Jumeirah Village Circle. But this location factor alone won’t be sufficient to meet the demand for certainly affordable apartments.
Therefore, developers had to use their old trick — cutting and squeezing the floor area in their properties, even in the high-end property segment. AED 280,000 is the price for a 400 square feet studio in area with promising, but so far non-existent infrastructure. Besides, it is not a secret that such price tickets were used by the developer only to attract more attention to its new project. No more than 10 units out of more than 300 were actually available on the market at this price. Thus, by simply dividing the cost of such "squeezed" apartments by their floor area size, we can assure that the average price per square foot will remain actually unchanged.
And yet, the number of small and ‘cut-down’ apartments is growing, and it grows pro rata with the demand. The same happens with the elite studios in central areas, like in a residential complex Studio One, where studios for sale are priced at AED 570,000, imexre.com has recently reported of. It is also the result of meeting the demand for small units in central, more prestigious areas of Dubai, such as Dubai Marina, which are more than suitable for renting out and receiving high rental yields.
However, Matthew Green from CBRE consultancy believes that reducing apartments’ size is only a temporary move.
"You can make room sizes smaller and more liveable, but I think it’s something developers need to be careful with, because in a couple of years people might start to suddenly say ‘Well, I would rather be with this developer because they still offer the size of unit I have become accustomed to’," he said.