Despite 2018 being a muted year for economic growth, the recent IMF outlook for Dubai bodes well on the back of the government-led stimulus, Expo 2020 investment and higher oil prices. Dubai’s real estate sector is expected to gather momentum throughout 2019, but a flood of new supply could impact sales and rental prices. One of the residential real estate trends we are seeing is people looking to move further afield to get the space they require for better value. Developers are hence looking at new models of communities and increasingly focussing on projects that are both environmentally sustainable, yet enjoy decent demand from investors.
Looking further afield
The economic downturn has significantly affected traditional packages, including accommodation, schooling and travel. The drop in oil prices impacted many businesses, resulting in salaries stagnating or even falling. However, it has also prompted residents to think more about moving to other areas in the emirate. Hence, Dubai will continue to experience a shift in population mix, with the middle household income salary bracket of Dh10,000-Dh19,999 seeing the greatest growth, diluting those in the upper bracket of Dh35,000+, which sees a much lower rate of growth.
10-20kThe income bracket seeing the greatest population growth
With new projects coming into the market on the outskirts of Dubai, tenants and homebuyers in general will have an even broader range of choices. This will consequently bring about a significant shift in housing needs, which could result in a low appetite for higher-end villas and generate more interest in apartments instead, since lower-income employees may choose to keep family in their countries of origin.
As residential real estate activities continue to both grow and diversify in Dubai, older and more established communities will face ever-increasing competition from newer developments.
Bringing in ease
However, this presents multiple facets for consideration. Broadly, happiness, social and economic development can be tackled if developers are able to provide more cost-effective living for those on middle incomes, which would keep their families, and hence spending, within the local economy.
25The proportion of journeys in Dubai expected to be autonomous by 2025
Typically, densification and mixed-use communities are optimal ways to increase efficiency, through concentration of infrastructure, thereby minimising redundancy and travel times.
Both of these factors reduce environmental footprint, and in parallel also reduce individual purchase or rent, and commuting expenses.
To achieve this, communities need to ensure all needs beyond home and work are provided for, including medical care, education and shopping. In addition, residents should be able to move between locations quickly and easily given the country’s hot summer months, yet within an environmentally responsible manner. For example, this can be achieved with the use of shared electric vehicles.
To make long commutes easier, communities need to have not just road access but, more importantly, high-availability public transport, leveraging high-capacity, high-frequency modes of public transport complemented with shared, personal transportation vehicles for harder-to-reach locations.
The UAE’s stringent approach to green building regulation and rating is visible through its sustainable developments like Estidama Pearls in Abu Dhabi and Al Sa’fat in Dubai. While achieving a high-rating is initially significantly more expensive for the developer, it may be more efficient for residents overall. Hence, many governments wish to link permitting and housing fees to efficiency, to incentivise sustainable behaviour from developers and occupiers, which has proven to be an effective European model.
75%The expected proportion of power consumption from clean energy by 2050
Ultimately, with the UAE’s leadership role in this space, Dubai aims 25 per cent of journeys autonomous by 2025 and 75 per cent clean energy by 2050. Sustainability is a key component of the national agenda, and recently highlighted by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.
Therefore, it is crucial for developers to embed such policies at heart of new developments. Similarly, if developers can deliver on tailored housing needs to the shifting demographics, they will see businesses approach more sustainable models of profitability.
Matthew Palmer is managing director of Alvarez and Marsal in Dubai. The views expressed here are his own.