Dubai’s real estate market needs sustainable pricing for middle-income families

Dubai’s real estate market needs sustainable pricing for middle-income families

UAE - Middle-income families are usually priced out of Dubai’s real estate market every time the demand of properties goes up as developers increase profit margin. Prices of a studio apartment that currently ranges from Dh800,000 to Dh1 million reflects a possible ‘overheating’ in Dubai’s real estate market. Investors who are buying property at the current price, might not be able to sell them at the same price if the market softens in the coming years, says officials and market analysts.

Rental income of at best Dh40,000 from a studio flat that was purchased at Dh800,000 translates to a 5 per cent annual return, excluding the service charge. It is safe to calculate the rental income to be around Dh32,000 and if the service charges are included, the return is less than 4 per cent on investment of Dh800,000. This could make investment in real estate ‘uneconomic’, as there are other investment instruments that might offer higher returns.

A Dubai-based property developer, Dugasta Properties Development, is launching affordable homes with prices starting from as low as Dh400,000 for a studio apartment. Moreover, it is offering an 8 per cent annual guaranteed return on investment – based on certain terms and conditions –