Need for low-cost housing set to grow

Need for low-cost housing set to grow

Tuesday, Jan 13, 2009

Gulf News

Dubai: The need for low-cost housing will be more urgent in 2009, experts say.

With 32,000 units set to hit Dubai's market this year, on top of the 27,000 units that came on in 2008, the key issue is to make sure people are able to buy them.

Around 80,000 apartments and 8,000 villas are due to be released between 2009 and 2010, according to Ronald Hinchey, resident partner at property firm Cluttons.

There is a huge latent demand waiting in the wings, said Hinchey. As soon as prices bottom out, buyers will jump right in.

"Affordability of selling prices and rentals need to be addressed. I hope rentals drop to half of what they were. When it's affordable, we can see a future," Hinchey said at the Dubai Property Society monthly meeting yesterday.

The light at the end of the tunnel is now clearly visible, in terms of both buying and renting.

House prices dropped eight per cent in the three months between October and December 2008, according to Colliers International.

The hope is, they will drop further.

As for rents, while rental rates are falling, it is also possible, perhaps more than ever, to pay in more than one cheque - a clear sign of a more confident and flexible market.

It is now possible to buy a villa in the Springs for Dh1 million and a villa in Arabian Ranches for Dh1.2 million. These sort of prices in these areas would have been in the realm of fantasy a year ago.

The two problems in Dubai's market right now are a lack of mortgage availability and a lack of confidence.

Banks and lending institutions have tightened their loans to value ratios over the past couple of months, so along with high prices, it is currently very hard for genuine end-users to get on the property ladder.

However, liquidity is available in the local banks, they are just being cautious, Hinchey added.

"These Gulf states have massive cash reserves. We've got that advantage where the rest of the world almost hasn't," Hinchey said.

Western governments have had to raise money to pump in to the economy, which is deficit financing, said Blair Hagkull, managing director Middle East, Jones Lang LaSalle. "This leads to massive inflation. Banana Republics do that. Governments here don't need to do that and that's the major difference," Hagkull said.

32,000 units set to hit Dubai this year
80,000 apartments to enter market in two years
8,000 villas to be added to the market in two years
8% recent fall in house prices
© Gulf News 2009. All rights reserved.

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