Unit prices in Dubai master developments at affordable levels

Prices of apartments in master developments such as Dubai Silicon Oasis, International City and Discovery Gardens have stabilised in the past three months, making them "affordable" for middle income earners in the emirate, according to real estate agents. "The most affordable areas in the emirate are Dubai Silicon Oasis, International City and Discovery Gardens, where prices have levelled off in the past three months," said Vineet Kumar, Head of Sales-Dubai, Asteco Property Management. According to Gowealthy. com, apartments in affordable housing projects have recorded a marginal drop of about five to 10 per cent in the past quarter. In International City prices for a studio, one-bedroom and two-bedroom apartments were about Dh290,000, Dh475,000 and Dh578,000, respectively, during the first quarter of 2009. The current prices for these properties stand at Dh275,000, Dh450,000 and Dh550,000, respectively, reflecting a decline of roughly five per cent since the past quarter, said Parvees Gafur, Executive Vice-President for International Sales, Gowealthy.com. Prices stabilising Mohanad Alwadiya, Director, Harbor Real Estate, said prices in affordable housing are now stabilising but there is an increasing demand. "In Motor City, the residential apartment prices were about Dh900 a square foot in the second quarter of 2008 and is now about Dh600 per square foot. In International City, the average price per square foot has dropped from Dh830 in the second quarter of 2008 to Dh600 in the second quarter of 2009. In Discovery Gardens prices were Dh1,050 per square foot in the second quarter of 2008 and are now about Dh650 per square foot," he added. From a rental perspective, Rose-Marie Kilzi, Leasing and Resale Director at Great Properties, said Discovery Gardens, International City and Springs villas continue to offer the cheapest rental rates in Dubai. "A one-bedroom apartment in Discovery Gardens is currently in the range of Dh55,000 to Dh65,000 per annum. For a two-bedroom villa, the Springs is the cheapest rental property going for Dh100,000 per annum upwards. The rents have stabilised over the past three months," she said. According to realtors, mortgages are easier to find for affordable housing units with banks generally lending at around 75 to 80 per cent loan-to-value ratio (LTV). Alwadiya said most banks are offering mortgages on finished properties or those that will be ready within the next 45 days. The LTV ratio is still hovering around 75 per cent on average at an interest rate ranging between nine to 11 per cent, he said. "Some banks are even offering mortgages on some off-plan projects," he added. Asteco said mortgage availability on finished properties hovered around 75 to 80 per cent of the assessed value of the property. "Four banks are very actively providing mortgages including HSBC, Abu Dhabi Commercial Bank, Dubai Islamic Bank and RakBank," said Kumar. No oversupply risk Analysts said people with incomes starting from Dh20,000 per month upwards were able to buy affordable housing in Dubai. They all said there was no risk of affordable housing becoming oversupplied in the market due to demand not yet picking up very strongly and the fact that a number of properties are yet to come into the market. Kumar said: "Affordable housing supply is limited. The market has more projects on going, which are mid-market to luxury. The only affordable projects built so far are International City and Discovery Gardens. What has happened with the correction is that a lot of the finished projects have now become affordable and end users are taking advantage of this correction." Alwadiya said: "We are witnessing an earlier than expected recovery signs in the market today that will help enhance and boost the demand on property. Affordable projects will benefit first and most during the early recovery stages, which will ease the pressure on the supply of such projects." Gafur believes supplies are not pouring into the market as expected or predicted earlier last year. Also, considering existing units and their expected delivery dates, it is still not enough to meet the entire demand for affordable housing from both a sales and rental perspective. "Current demand levels may seem a bit lean due to various factors such as summer holidays, price drop expectations etc. But the latent demand for affordable housing is still quite strong and it is just a matter of time and initiation of positive factors such as increased lending before the demand levels show a visible upward trend again," he added. Demand picking up According to agents, demand for affordable projects is picking up as buyers are continually seeking to take advantage of the low prices. "Demand on affordable residential assets is exceeding demand on affordable offices. This is mainly driven by the fact that the number of ready affordable residential projects exceeds the number of ready affordable office projects today," said Alwadiya. Kumar said the demand