Dubai: Dubai real estate’s mid-tier is where the action is starting to hot up ... and it is happening on prices, locations, and in buyer support.
Based on the year-to-September transaction data in Dubai, properties that can be classified as mid-market accounted for more than 70 pert cent of the deals, and the rest made up of upscale and super-premium. This would represent the best ever percentage levels recorded by the mid-market, more so as property sales in Dubai have historically weighed heavily in favour of premium offerings. In fact, last year, the split averaged around 70:30 in favour of the premium over the mid-tier. And even during the first half of this year, the split was running nearly equal.
“The market’s clearly starting to see the presence of a younger buyer who is more comfortable putting aside Dh500,000 and more on a one-bedroom apartment than spend Dh2 million,” said Talal Al Gaddah, CEO of MAG Property Development, which is now working on the final details before the release of a further set of units at its MAG 5 Boulevard project in Dubai South.
“You are seeing versions of this trend everywhere — in hospitality, the global average room rates at five-star properties are now around $180 against the $400-$500 in 2013. Everything’s changing.
“The younger buyer believes spending on a lifestyle is more important than committing a large percentage of their income on their property instalments. It’s these buyers that, increasingly, Dubai’s developers will have to go for. For the next 5-10 years, you will see a lot happening around the Dh600-Dh900 a square foot pricing levels.”
Split into three phases, the MAG 5 development — launched last year and set for completion in Q4-18 — will have 1,172 homes. So far, 400 of these have been released for sale, with the developer trimming the price point from Dh900 a square foot to Dh800 in the second release. Construction started earlier this month, and work on each phase will start six months after the launch of the previous one.
Apart from International City, which continues to be the focal point of mid-market buyers, the activity is spreading to Remraam, Al Furjan and Sports City. And then there is Dubai South, boosted by two back-to-back launches of first sales phases at The Pulse and Emaar South communities,
But Dubai’s mid-market story is starting to spread out. “While the latest community to attract attention is Dubai South, competing for the buyer’s interest are Jumeirah Village, IMPZ, Arjan, Majan, Liwan and Dubai Residential Complex where land parcels can be had for Dh100 per square foot or even slightly lower,” said Sameer Lakhani, managing director of Global Capital Partners. “These lower priced land allows developers to pursue mid-market possibilities at competitive rates.”
In Dubai South, according to Lakhani, land values are in the Dh100-Dh140 a square foot range depending on the size of the plot and location. “The new set of mid-market communities will show a greater level of participation from end users given that these homes include larger spaces, including two- and three-bedroom units,” said Lakhani. “In contrast, existing locations such as International City were predominantly investor-based and purchased for their higher rental yields.”
And the yields available are enticing enough for developers as well. The Regal Group, which has an existing joint venture on two super-premium tower projects in the Downtown and JLT, confirmed it is getting into mid-market opportunities as well.
According to Vikram Shroff, director of Regal, “In the mid-market space, our interest is not necessarily to go after the end user. It is to cater to the growing needs of corporates that need to house their staff but are unable to do so given the lack of quality housing options.
“We will provide the buildings in communities to specifically address corporate staff housing needs. We are bullish on real estate prospects in Dubai — both at the bespoke luxury end as well in the mid-market. But for different reasons, of course.”