What does the UAE residential market have for millennial homeowners? Currently between 22 and 37 years, and born between 1981 and 1996, millennials are those entering or working their way up the workforce.
With flexible payments options from many developers, affordable housing options and new government initiatives boosting the UAE property market, there is an increasing potential from this segment to invest, feels Matthew Palmer, managing director of real estate advisory firm Alvarez & Marsal.
“Fundamentally, we still don’t see many in their 20s entering the property market here in Dubai,” he says. “Typically, at this age, people are either paying down student debt or saving towards other life goals, such as an MBA or wedding. If they are willing and able to invest in property, it is more likely to be in their home country as they are still not sure about their tenure in this country. But for the section that is well settled in Dubai and secured in jobs, the next step is to turn their thoughts towards home ownership, rather than merely renting.”
Focus on savings
According to Palmer, millennials who are considering buying a home should review and prioritise their short- and longer-term financial objectives, focusing on savings to enable home ownership. Data suggest that home ownership is typically a sound cornerstone of a long-term financial strategy. Hence, millennials should look to developments, which meet occupiers’ criteria and will remain attractive in the long run.
Millennials traditionally value social responsibility and sustainable development, with an appreciation and preference for eco-friendly developments. “They want to work in integrated live-work communities with a focus on green and sustainable development. Communities such as Dubai International Financial Centre [DIFC], Mohammad Bin Rashid City and The Sustainable City encompass such traits,” says Palmer.
But Downtown and DIFC also remain primary destinations for millennials, especially since rents have softened. “While the Marina used to be popular, it appears that commuting is not, especially as more and more businesses have relocated from the Dubai Media City to those at the opposite end of town, such as D3 and DIFC. Emirates Living also attracts some of the older millennials, those in their 30s with families,” he says.
In its first-quarter Dubai Market Report, real estate services firm Chestertons observed that developers in Dubai’s residential property market are targeting a new buyer and tenant segment by offering innovative co-living and licensed co-working concepts. Ivana Vucinic, head of consulting at Chestertons Middle East and North Africa, said that in a bid to remain competitive and open up the market to a new segment of buyers, several developers are currently offering a range of innovative living solutions, allowing residents to live and work in the same space.
“These solutions are specifically aimed at a younger tenant and buyer profile, who don’t necessarily need large living spaces but place importance on having their business and lifestyle requirements catered to in one development. Such solutions are being offered in Emaar’s Collective Tower and Socio as well as Nshama’s Una in the Town Square community,” she said.
Another key strategy employed by developers that could boost investment from millennials is the introduction of rent-to-own (RTO) schemes. These schemes offset the need for a large cash deposit and would appeal to buyers who don’t have the 25 per cent down payment or are unsure of future market trends. “RTO deals can currently be found in areas such as Jumeirah Village Circle, Palm Jumeirah and Dubai Sports City,” said Vucinic.
She further said that there is an increase in Airbnb-style rentals in the market with increasing occupancy rates year-on-year. “These types of properties are preferable for individuals working in the emirate on a project basis or who are within their probation period, as they are unable to commit to traditional annual rental contracts as the tenancy cannot be registered if the residency visa is still to be granted.”
Anna Skigin, CEO of Frank Porter, said platforms like Airbnb are making Dubai a welcoming place for the sharing economy. The last few years have shown that Airbnb homes can be attractive for price-sensitive younger buyers and, according to Skigin, “we are certain that this will continue to grow beyond Expo 2020”.