It is no secret that the UAE has a reputation for being an expensive country when it comes to real estate. Up until the later years of the country's construction boom, real estate remained mostly a seller's market across the UAE. However, with the recent slowdown on the demand side and a prolonged oversupply, the market's balance may be about to change. Meanwhile, the expansion of the UAE's middle class and its demand for affordable housing options calls for the emergence of a new segment in the market.
The growing demand for economy-class housing has coincided with a drop in flat prices and rents across the UAE. In 1H2019, prices for residential properties took a nosedive across Sharjah, from Al Majaz to Abu Shagara, by as much as 6-13% YoY. As such, underpriced flats and even villas are now—in practice—catering to the needs of lower-income customers, though they were not originally developed as affordable housing projects.
The declining prices in 2019 caught no one by surprise; Dubizzle, a UAE real-estate platform, had published a report on northern Emirates in 2018 and noted a “prominent decline in rentals and sales prices in both Sharjah and Ajman across apartments and villas."
Bayut, another UAE-based property portal, described Sharjah as a market ideal for buyers and tenants in its end-of-year report for 2018. This tallies with the fact that more and more apartment buildings whose construction began two to five years ago are now coming into the market, with even more in the pipeline.
In light of these developments across the market—which are also expected to continue in 2019—affordable real estate is becoming a realty in Sharjah. According to Gulf News, some tenants in Sharjah and Dubai express their surprise at receiving competitive offers from landlords who feel threatened by the growing list of vacant flats up for grabs. At times, bonuses such as flexible payment options, rent discounts, and rent waivers for a month or two are thrown in by developers and individual sellers.
In any case, the empowerment of mid-market buyers and the real estate market's shift toward affordability may turn out to be an advantageous development for both sides in the long run. In most mature markets, after all, the affordable segment functions as the main driver for the entire market.
Some analysts, meanwhile, have pointed out that the term “affordable" is being used comparatively in this context, as affordable accommodation for lower-income households—in the real sense of the word—is not presently available in the UAE, adding that although the temporary decline in prices of high-end units may create a false impression of affordability, a real mid-tier housing market has yet to emerge in the country.
The fall in property prices in Sharjah is compounded by what is going on in Dubai. The two cities, after all, have highly interconnected economies and are located no more than 30km apart. It was more or less predictable that Dubai's low-cost housing initiative, launched in 2017, would have a knock-on effect which would be felt not only in Sharjah but also in Ajman.
After the launching of Dubai's affordable housing initiative, southern parts of Dubai have become the site of many affordable construction projects. Upon completion, these developments can lead to the reverse migration of many working class commuters from northern Emirates to Dubai. In plain words, housing in Sharjah is expected to become even more affordable.
The developers' attitude is changing, as well. Low-income housing is a necessity in any dynamic community, and real estate companies in both Dubai and Sharjah have realized as much. More inclusive communities are expected to emerge in the UAE in the coming years, where white-collar workers and junior professionals whose incomes fall in various ranges can live side by side.
The principle of inclusionary zoning is also manifested in master-planned residential communities currently under construction in Sharjah. Aljadah, a major billion-dollar upcoming real estate development in Sharjah, for instance, will feature over 1,200 affordable small apartments and studio flats and even dormitories to cater to the needs of the community's students.