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Gap in Abu Dhabi market for ‘genuine affordable’ housing: Cluttons

December 2015

December 8, 2015 | 10:45 | Abu Dhabi

The lack of affordable housing in Abu Dhabi provides a major opportunity for developers to fill the gap with ‘genuine affordable’ housing, says international real estate consultancy Cluttons. According to Cluttons’ Abu Dhabi 2015-16 Winter Property Market Snapshot the growing problem of the lack of affordable housing in the Abu Dhabi is incredibly clear, sighting a 34% increase in average house prices since 2010. Edward Carnegy, head of Cluttons Abu Dhabi, said: “Abu Dhabi is clearly short of affordable neighbourhoods. This issue of affordability has been building for some time, initially following the introduction of the Federal Mortgage cap and doubling of property registration fees. These had the desired effect of cooling the market, but now many people are forced to pay premium rents, limiting their ability to become owner occupiers in the long term. This presents a major opportunity for developers to deliver housing that is ‘genuinely affordable’, while still of a high quality, with the potential to offer flexible access to home ownership through models such as ‘rent-to-own’.”

Newly planned legislation around fixed quotas for “affordable homes” which may help to ease access to the property market has been drafted; but details are yet to be confirmed. According to Cluttons, the idea of affordable housing has served cities such as London well, where developers are liable to provide affordable housing for developments starting with as little as ten units. Faisal Durrani, Head of Research at Cluttons said: “In order to truly tackle the problem of affordability, it’s important to run the numbers. An average expat household aspiring to purchase a home in Abu Dhabi has to contend with an average annual rent of AED 204,000 against an average household income of AED 199,000. Furthermore, there are signs that a liquidity crunch may be bubbling away in the background. During October, The National Bank of Abu Dhabi reported a AED 56 billion decline in government deposits between September 2014 and September 2015 across the UAE banking system, which is likely to curb mortgage lending, putting home ownership out of reach for many.”

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