Gloomy expats downsize as financial woes impact
Expats in the United Arab Emirates are turning away for high-end homes to find more affordable living space. A slump in property prices that is on the cusp of starting to bounce back to the highs of several years ago and concerns about the rising cost of living and job security are prompting home buyers and renters to look for value for money.
Local estate agents agree the change of heart is forcing developers to make smaller, affordable homes available.
Families go home
Families are downsizing to one-bedroom apartments or studios for breadwinning expats while partners and children return home, said John Stevens, managing director of UAE property consultants Asteco.
”We are seeing signs of this in Abu Dhabi, with a migration or downsizing mainly from high-end large units to more affordable developments,” he said.
“This has led rising vacancy rates for larger units which could prompt an increase in rental rates for smaller units in more desirable buildings.”
Stevens and other agents complain a lack of smaller homes putting a brake on the property market. Dubai and Abu Dhabi both lack affordable properties as only 2,000 or so units hitting the market in Dubai and around 800 in Abu Dhabi in recent months and developers have few mid-market properties in their delivery pipelines.
Rents and prices to fall further
The result, say property consultants, is more renters and buyers are chasing the next cheapest tier of homes and the competition is pushing rents and prices up. Another UAE property consultant, Cluttons, is predicting a further decline in rents and property prices for the rest of 2016.
The firm points out that heavy numbers of redundancies in oil and gas production has hit demand for homes. Faisal Durrani, head of research at Cluttons said: “In Dubai, we believe that the residential market will start to stabilise by the end of 2017, largely due to the ‘Expo 2020 effect’ and this, in turn, will influence the demand for real estate in Sharjah, but until then, further slight softening is expected in Dubai.
“Our forecasts, however, remain unchanged and on track, with Dubai likely to see residential values end the year down by between -5% for apartments and -7% for villas.”