People often pay half of their salaries or more on rent, instead of the target benchmark of 30%
Tens of thousands of luxury projects were on display at Cityscape Global in Dubai, but missing from the glittering mock-ups and pipeline of home dreams being rolled out were more affordable housing projects for the Middle East’s large and burgeoning population of young and aspiring home owners.
Property analysts say oil-exporting countries in the Gulf are facing an immediate need to create more affordable housing, especially as the price of living rises.
Once awash in oil revenue, governments in the Gulf are racing to try and create new sources of income. To offset the impact of lower oil prices on state revenues, governments have lifted subsidies on food and energy and are rolling out a value-added taxation system.
The construction sector, though, has been among the hardest-hit.
In Saudi Arabia, for example, the government has not been paying contractors on time. This has affected payments to sub-contractors and delayed the completion of projects, including government-backed affordable housing units.
Major construction firms like Saudi Oger and the Saudi Binladin Group have faced major downsizing and thousands of layoffs.
“The biggest challenge in Saudi Arabia is actually delivering the product,” said Craig Plumb, head of research for the Middle East and Africa at investment company Jones Lang LaSalle (JLL).
“There’s a lot of announced projects… but they don’t have the contractors, they don’t have the quality builders to actually deliver on time and on cost and that’s actually probably been made slightly worse over the past year or so because a lot of the contractors have had to withdraw from the market,” he said.
Plumb was speaking at Cityscape Global, where developers from across the Middle East unveiled their projects – many still off-plan – and pitched to investors wanting to grow their portfolios.
Developer Damac, for example, announced its luxury villas designed by Just Cavalli. Others showed off high-rise towers with two and three-bedroom apartments starting at well over half-a-million dollars and still to be handed over at the earliest by 2020.