It is always a very promising sign when an industry demonstrates the flexibility and resilience to undertake a structural shift when market requirements change or develop. This is exactly what has happened in Dubai’s property and real estate industry.
It came as no surprise to those that take a broader view of the industry that calls from a variety of industry participants including the government, banks and the more visionary industry observers for more affordable housing in Dubai had gathered volume and intensity over the past few years. In so doing, there was a recognition that the most important investor in Dubai’s Real Estate market had been forgotten too often by developers and brokers and that a refocusing on building affordable, robust and sustainable communities to be inhabited by the average family living frugally on an average salary was of irrefutable importance if Dubai’s economy was to develop and grow to the next level.
The bedrock of any property industry is its owner occupiers. They represent the core of the industry as it is they who view property as an investment in life, not just a way to make a quick buck. And yet only recently have they attracted focus in Dubai’s rapidly maturing industry which is more proportionate to their importance.
Owner occupiers see Real Estate in a different light. Typically they are normal people, not overly wealthy, who are concerned with providing the family with a future. For them, it’s about creating a lifestyle. Its about creating a home which will provide an environment that is safe and secure within which the individual, couple or family can grow and develop in all aspects whether physical, emotional, social and, of course, financial. In this respect they have a lot more at stake than those investors with financial interests only.
Healthy, vibrant and progressive communities are built around the stability that owner occupiers bring. They are less likely to migrate to another neighborhood and are more concerned with regards to the overall well being of the community that they are part of. They establish relationships that strengthen the fabric of a community which itself can become a powerful voice for progress.
And these communities are now springing into life all over Dubai. Communities such as Skycourts, Q Point and Motor City in Dubailand have shown how rapidly communities can develop and grow to provide a lifestyle that belies their affordability.
So who needs to ensure that this most important consumer segment is catered for in an industry which can be notoriously out of touch with consumer requirements? Well, just about everybody who plays a role in our industry but, more significantly, the government, the financiers and the developers. And given the results of 2016, they are to be congratulated for initiating the structural shifts that we are witnessing.
The dialogue regarding the dual objectives of affordability and profitable sustainable growth for the real estate sector must be ongoing as a continual and constant review of possible initiatives and regulatory actions that will ensure that the considerable progress already made and foundations laid in strengthening and modelling the industry is continually built upon. The health of the industry is too important and the issue of affordability is critical to the broader economy as well. Dubai can ill afford becoming cost uncompetitive in the global market in the lead up to the 2020 World Expo.
For any Real Estate market to function efficiently and effectively, it requires a banking sector which is also functioning efficiently and effectively. Banks play a fundamental role in enabling prospective home owner occupiers own a piece of Real Estate. If you consider that in most global markets, anywhere between 65% and 85% of residential property transactions involve some form of financing, and reflect on the fact that in Dubai the number of residential property purchases financed by mortgages in 2016 was around 50% there appears to be plenty of scope for more growth. This number is actually up from the 33% historically seen in the emirate so it appears that the banks are discovering the formula of providing accessible finance to a broader consumer base without taking on excessive, whether real or perceived, risk.
Developers have come a long way in providing greater supply of affordable housing. To their credit, they now have a deeper understanding of what is required by this segment of the market. They themselves have improved in providing recognizable value, emanating from a greater focus on the customers and their requirements and value expectations. Some have demonstrated innovative approaches to delivering affordable solutions which are valued by the customer, and done so profitably.
Virtually every industry has faced this challenge over the last 5 decades and many have demonstrated that giant strides in the provision of true value while retaining healthy margins is possible. Dubai’s property Industry will continue to follow a similar path in 2017.
