Affordable Housing in the Middle East – A Land Sterling Analysis
By 2050, 64% of the developing world and 86% of the developed world will be urbanized. The United Nations has projected that nearly all of the global population growth up until 2030 will be absorbed by cities, leading to almost 1.1 billion new city dwellers. As the world moves towards greater urbanization, the question of affordable housing comes to the forefront. In the Middle East, where the majority of property developments in countries such as the UAE and Saudi Arabia cater to the luxury and ultra-rich segments, the issues created by the lack of affordable housing has reached worrying levels.
Why is there such a lack of affordable housing?
The lack of affordable housing in the Middle East is due to a combination of factors such as, underutilization of land as developers buy and sit on land parcels, lack of affordable finance which puts most new property developments out of reach for prospective low income buyers and a large expat population in most GCC countries are increasing demand for housing and pushing up prices. All these factors together contribute to the chronic lack of supply and exacerbate the issue.
How is the Middle East responding?
Traditionally, the development of affordable housing was the purview of various national governments in the Middle East. However, with the increase in population and the change in demographics in most of the region, more and more first time buyers are entering the market. As demand now vastly outstrips supply, governments can no longer tackle this issue on their own. Here are some of the steps taken by both public and private companies in the main markets of the Middle East:
The United Arab Emirates
- The governments of Abu Dhabi and Dubai have recently decreed that a certain percentage of all future real estate developments are to be set aside for the development of low income housing.
- Developers such as Danube Properties have recognized the opportunity present in catering to the low to middle income segment of the market and have adjusted their business models accordingly.
- Starting from 2017, affordable housing is now a priority for both the public and private sectors, with an increased number of affordable units for sale.
- Launching of the ESKAN portal by the Ministry of Housing to help provide more affordable homes for Saudi citizens.
- Commencement of major government projects such as the Salman Bay project in Jeddah to help deliver more affordable homes to the Saudi market.
- Implementation of a white land tax to free up more land for development around urban areas.
Year on year, we are seeing Middle Eastern governments taking a greater interest on the subject of affordable housing and new policies are being introduced to stimulate low income housing. There are still issues that need to be addressed such as land supply, low income community integration and liberalization of credit in order to help low income buyers get a mortgage in order to buy property. These are all things that will come in time. For now, these steps and the government’s approach are a promising sign that maybe soon, these worries will be a thing of the past.
To know more, or get additional strategic insight into the Middle East, contact Land Sterling’s Strategic Research team at email@example.com or call us on +971 43 808 707.