Affordability 4 Years On - Measuring Affordability Levels in Abu Dhabi | UAE 2018 - Cityscape Abu Dhabi
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Affordability
4 Years On…
Measuring Affordability Levels
in Abu Dhabi | UAE 2018
Affordability 4 Years On | 2018 | Colliers International 1
Definition of
Affordable Housing:
The definition of affordable housing varies from market
to market subject to local economic variances. For this 35%
*UAE Average Households
overview, Colliers defines Affordable Housing as housing
units that are priced in a manner that could be purchased
and/ rented by an average household utilizing 35%* of their
income. In mature real estate markets such as UK and USA,
households spend approximately 20% on housing, while 20%
UK and USA Households
developing markets such as India and China households
spend approximately 30%. The relatively higher spend of
housing in the UAE is likely to the tax free economy.
30%
India and China Households
* In the UAE, income expenditure surveys
conducted by government bodies suggests
that average households spend 32% - 37%
on housing.
2 Affordability 4 Years On | 2018 | Colliers International
AN INTRODUCTION
TO ABU DHABI’S Ian Albert
Regional Director
RESIDENTIAL Middle East and
North Africa
ian.albert@colliers.com
MARKET LANDSCAPE
An ongoing transformation of quality affordable living
2014 saw the publication of the first report, authored by Colliers,
that looked into the need for and the size of the affordable housing
market in Abu Dhabi – Four years later we return to look at the
impact of that report and what, if anything, has changed. Mansoor Ahmed
Director
In the 2014 report Colliers studied average income levels of Development Solutions
Healthcare | Education | PPP
households in the emirate and highlighted the opportunity for
Middle East and North Africa
developers within this undersupplied market. Since then, the mansoor.ahmed@colliers.com
market witnessed significant changes; the introduction of new
affordable housing plans and tier-one developers such as Aldar
launching more affordable developments have proved successful
despite increasingly competitive environment.
Affordable housing has not only driven by the price per sqm of net
sellable area of the unit, but also the product/ unit size and the
changing consumer profile (income vs, expenditure). These critical
Mariam Mahmooth
elements form part of the platform of the residential market.
Associate Director
In 2018, the net effect of the introduction of affordable housing Development Solutions
units priced less than AED 11,000/sqm are expected to reach Middle East and North Africa
approximately 15%of total freehold units. Mariam.Mahmooth@colliers.com
P r i ce p e r S Q
M
These elements have been
analysed in detail since 2014
(the first whitepaper issued
by Colliers on Abu Dhabi’s
u m er
affordable housing gap). The
results of the landscape shift
Cons
ABU DHABI’S have been summarized in
RESIDENTIAL MARKET this overview
the
P ro
LANDSCAPE
of
du
ct
ile
iz
Pr
of
S
e
Affordability 4 Years On | 2018 | Colliers International 3
Price Affordability Landscape
– Rental Market
THE TIMELINE BELOW GRAPHICALLY PRESENTS THE KEY
EVENTS DURING 2014 – 2018 WHICH SHAPED THE EMIRATES
HOUSING MARKET.
Colliers issued the first whitepaper addressing the need for
2014 affordable housing
Housing units priced less than AED 11,000/sqm represented
approximately 9% of total freehold units
Abu Dhabi General Services (Musanada), announced plans
2015
to build hundreds of low-cost houses in Al Manaief City in
the Western Region
Abu Dhabi Urban Planning Council announced plans to
enact legislation requiring 20% of every new development
to offer affordable homes
2016 Aldar launched The Bridges, its first affordable development
of the year, in April. It generated about AED600 million in
sales, and was sold out within three weeks of its launch at
Cityscape Abu Dhabi
2017
Abu Dhabi Launches New Affordable Housing Plan for
Low-Income Groups
The scheme aims to provide housing at rents ranging from
AED70 to AED2,100 per month
2018 15% Housing units prices less than AED 11,000/sqm are
expected to reach approximiately 15% of total freehold units
4 Affordability 4 Years On | 2018 | Colliers International
Price Affordability
Landscape – Rental
Market
Abu Dhabi’s
Residential Rental Market - YOY % Change
Source: Colliers International 2018
12,800
units new
supply
20
11,800
units new
supply
10,300
15 7,200 units new
units new supply
supply
11,600 8,700 8,700
10 units new units new units new
supply supply supply
5
16,3% 7,4% 6,9% 3,7%
0
-1,6%
-2,7%
-5,5%
-5
-10
-15 -16,3%
2018 - New Supplier Percentage increase/
-20 2011 2012 2013 2014 2015 2016 2017 to Date per Annum decrease in rents
From 2015 Abu Dhabi’s rental market has witnessed YOY
declines, albeit not greater than 5.5% (overall). Declines
however, vary significantly from location, community and
unit type. However, unlike it’s neighbor, Dubai where there
is a large volume of freehold properties, in Abu Dhabi, the
market continues to be dominated by the leasehold market.
Popular locations for rentals include Abu Dhabi Corniche,
Markaziya, Tourist Club Area, Khalidiya and Mohammad
Bin Zayed City.
Affordable freehold areas such as Al Reef and to a certain
degree Yas Island have gained popularity among the mid
and upper-mid income groups.
Decline in Rental Market since 2014:
10% - 30%
5 Affordability 4 Years On | 2018 | Colliers International
Rental Market
Landscape
In our whitepaper in 2014 we compared two household
income types; those earning AED 15,000 and AED 35,000
per month. The same analysis was conducted with 2018 The rental options now available for a household earning
prices, and the results reflect a more affordable market AED 15,000 spreads across Al Markaziya, Khalidiya, TCA
landscape. The illustration below outlines the monthly and MBZ City. However, these are limited to 1-bedroom
payments required to rent an average apartment in key apartments only. Renting a two-bedroom apartment or larger
residential districts across Abu Dhabi by unit type. for households in this brackets will result in the household
spending more than 35% of their income on rent. The rental
analysis also suggests that options for those earning AED
35,000 have also increased since 2014. These households
can now afford to rent three bedroom apartments in
Corniche, Khalidiya, TCA and Reem Island. Four years ago
renting a three bedroom apartment for the same household
was affordable only in Markaziya, MBZ and Al Reef.
Average Monthly Rental
Payments by Location and
Unit Type (AED)
Tourist Al Reem Saadiyat Yaas
Club Area Island Island Island
2014 2018 2014 2018 2018 2018
Corniche
Beach
123 123 123 123 123 123
2014 2018 Bed Bed Bed Bed Bed Bed
Al Raha
Beach
Al 2014 2018
123 123 Khalidiya
Bed Bed
2014 2018
123 123
Bed Bed
123 123
Bed Bed
Al
Markaziya
2014 2018
Al Reef
2014 2018
123 123 Mohamed
Bed Bed Bin Zayed
Hs earning AED 15,000/Month 2014 2018 123 123
HHs earning AED 35,000/Month Bed Bed
HHs earning AED 35,000+/Month
123 123
Bed Bed
Source: Colliers International 2018
6 Affordability 4 Years On | 2018 | Colliers International
Price Affordability A DECLINE IN PRICES, BUT INCREASED
AFFORDABILITY
Landscape – Sales Like the rental market, Abu Dhabi’s residential sales market
Market
witnessed YOY declines each year from 2015. The freehold
market also witnessed a number of new supply coming in
with more affordable price tags, especially in Al Reef and Yas
Island. Saadiyat Island currently represents the higher-end
of the freehold market with average prices ranging between
Abu Dhabi’s
Residential Sales Market - YOY % Change
AED 14,000 and AED 17,000 per sqm for apartments.
Alternatively, average prices in Al Reef, which is a more
Source: Colliers International 2018
affordable freehold development ranges between AED 9,500
and AED 14,000 per sqm. The graph below summarises the
overall performance of Abu Dhabi’s sales market.
11,800
units new
12,800 supply
units new
supply
30 7,200 10,300
units new units new
supply supply
11,600 8,700 8,700
20 units new units new units new
supply supply supply
10
New Supplier Percentage increase/
20,4% 21,4% per Annum decrease in rents
0
-2,1%
-1,0%
-5,8% -5,2%
-10
-9,8%
2018 -
-20 2012 2013 2014 2015 2016 2017 to Date
7 Affordability 4 Years On | 2018 | Colliers International
Sales Market
Landscape
Colliers calculates equal monthly installments (EMIs) for
purchasing a unit based on the households’ ability to meet
monthly repayments post of a minimum down payment of The options available for a household earning AED
25%. The the map below outlines the monthly payments 15,000 (provided the 25% down payment is made) are
required to rent an average apartment in key freehold spread across various unit types in Abu Dhabi’s freehold
residential districts across Abu Dhabi by unit type. districts. However, in upmarket districts such as Al Raha
and Saadiyat Island, households earning AED 15,000 are
limited only to studio units should they wish to spend a
maximum of 35% of EMIs. Prices in Al Reef have become
more affordable since 2014 and now with an average EMI
of approx. AED 3,800 a household earning AED 15,000 a
month can afford to purchase a 2-bedroom unit, spending
35% of their monthly income. The overall sales price
analysis also suggests that investment options for those
earning AED 35,000 have also increased since 2014.
Average Monthly EMI by Location and
Unit Type (AED)*
Saadiyat
Island
2014 2018
Al Reef
S 1 23 S1 234 2014 2018
Yaas
Island
2014 2018
S1 23 S1 23
Al Reem S1 23 S1 23
Island
2014 2018
S 1 234 S 1 234
Al Raha
Beach
Hs earning AED 15,000/Month 2014 2018
HHs earning AED 35,000/Month
HHs earning AED 35,000+/Month
S1 23 S1 234
8 Affordability 4 Years On | 2018 | Colliers International
Product Sizes
A CONTRIBUTION TOWARDS AN AFFORDABLE PRODUCT
While affordability primarily relates to price points, a closer look into the
average unit sizes available in 2014 vs today suggests smaller, more compact
units have entered the market. The smaller unit sizes have resulted in an
overall affordable ticket price, lower cash down payments and cheaper
mortgage EMIs, making the residential market more attractive for investors.
SMALLER
AFFORDABLE LOWER CASH CHEAPER
Ticket Price Downpayments Mortgae EMIs Unit Size
Below Table
average unit sizes across Abu Dhabi’s key freehold residential districts
during 2014 vs. 2018
AL RAHA BEACH AL REEM
350
300
-3% -4% -3% -2%
250
200 -10% -10%
150
-22%
100
-25%
50
0
STUDIO 1BR 2BR 3BR 4BR STUDIO 1BR 2BR
2014 2018 % CHANGE
YAAS ISLAND AL REEF
350
300 0%
-4% -1%
-6%
-9% 250
200
-13%
150
100 -21%
-29%
50
0
STUDIO 1BR 2BR 3BR STUDIO 1BR 2BR 3BR
9 Affordability 4 Years On | 2018 | Colliers International
Consumer Profile
HOUSEHOLDS
2014 - 2022
INCOME EXPENDITURE TRENDS AND
THEIR RETURN ON INVESTMENT
The latest income expenditure survey for Abu Dhabi was 2020, after which YOY growth rates are expected to slow
published in 2009 and therefore, Colliers as a reliable down to 4%. Household spending on housing and utilities
alternative, has analyzed income and expenditure trends are also expected to maintain the same growth rates of
for the UAE since 2014. UAE’s per capita expenditure overall expenditure.
suggests that total expenditure among households in UAE
witnessed significant declines during 2014 – 2016. Per capita Household income on the other hand is expected
to grow at 5% YOY until 2022. The chart below graphically
In 2017 expenditure increased approximately 7% YOY, illustrates the expected income and expenditure trends
and is expected to continue the same momentum until moving forward.
Household
Vs. Expenditure
Income
Source: UAE National Bureau of Statistics, Business Monitor International, Colliers International Analysis, 2018
300 000
250 000
HOUSEHOLD INCOME:
Gross Income, per
200 000 capita, AED
DISPOSABLE
Income approx. HOUSEHOLD
150 000 DISPOSABLE AED 17 000 INCOME SPENDING
Income approx. DISPOSABLE per month
AED 15 000 Income approx. PER CAPITA: Total
per month AED 14 000 household spending,
per month
100 000 AED per capita
50 000
HOUSEHOLD INCOME
SPENDING PER
CAPITA: Housing and
0 utilities spending, AED
per capita
2014 2015 2016 2017 2018 2019 2020 2021 2022
Analysing the overall income and expenditure trends in UAE, the primary factor supporting the maintenance of a
residents’ disposable income during 2014 - 2018 is the declining rentals (between 10% and 30%). Since average
households spend approximately 35% of their income on housing, a reduction on this expenditure category translates
into more comfortable household budgets.
10 Affordability 4 Years On | 2018 | Colliers InternationalAverage Gross
Rental Yields
2BR 3BR
1BR 4BR
The expected return on investment also drives demand for
investment products. Analysing different unit types across
Abu Dhabi’s freehold districts suggests that gross rental
yields are the highest for the more affordable products. In
terms of developments/ communities, the highest average
yields are in Al Reef followed by Yas Island. While Al Raha
and Al Reem share similar rates of return, the lowest is in
Gr
ss
Saadiyat Island. The table below outlines the average gross
o
Re st
nt a
rental yield for each unit type across freehold districts l Y i e l ds H i ghe
in Abu Dhabi.
Average Gross Rental Yields
Highest achieving development: affordable communities,
such as Al Reef Development.
Highest achieving unit types: Studios and 1 Beds.
Saadiyat
Island
Studio 1 2 3 4
Bed
Yaas
Island
Al Reef
Studio 1 2 3
Bed
Al Reem
Island
Studio 1 2 3
Bed
Studio 1 2 3 4
Bed
Studios & 1Bed: 6.0% - 8.7%
Al Raha
2Bed & 3Bed: 5.2% - 8.2% Beach
4Bed: 4.55 - 5.5%
Studio 1 2 3 4
Bed
11 Affordability 4 Years On | 2018 | Colliers International Affordability 4 Years On | 2018 | Colliers International 11Operating in 69
countries on 6
continents
$2.7 billion Ian Albert
Regional Director
in annual revenue
Middle East and North Africa
ian.albert@colliers.com
2 billion Mansoor Ahmed
square metres
under management Director
Development Solutions | Healthcare | Education | PPP
Middle East and North Africa
15,400 mansoor.ahmed@colliers.com
Professionals
and staff Mariam Mahmooth
Associate Director | Development Solutions
Middle East and North Africa
Mariam.Mahmooth@colliers.com
Colliers International | MENA Region
Dubai | United Arab Emirates
+971 4 453 7400
About Colliers International
Colliers International is a global leader in commercial real estate services, with over 15,400 professionals operating
in 69 countries. Colliers International delivers a full range of services to real estate users, owners and investors
worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales
and consulting, valuation, consulting and appraisal services and insightful research. The latest annual survey by the
Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world.
In MENA Colliers International has provided leading advisory services through its regional offices since 1996.
Colliers International currently has six corporate offices in the region located in Dubai, Abu Dhabi, Egypt, Qatar,
Riyadh and Jeddah.
www.colliers.com/uae
Disclaimer
The information contained herein has been obtained from sources deemed reliable. While every
reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is
assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to
acting on any of the material contained in this report.
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