Getting On The Property Ladder: Millennial Home Buyers In The UAE
For baby boomers and generation X, owning a home or investing in property was a rite of passage – a checkbox that they fully intended to (and often did) tick off in their 20s. It signified adulthood and a sound financial investment. Fast-forward to Generation Y, to the much talked about millennials (born between 1981 – 1998) and one can be forgiven for thinking that their priorities lie elsewhere.
But, in general, and the UAE is no different, millennials are characterised by their disposable income, not to mention tech-savviness and understanding of value, be it of time, money and even experiences – hardly surprising given their experience of growing up with information at their fingertips! They are also incredibly well-travelled compared to previous generations and have been exposed to far more of what the world has to offer than previous generations. This sense of mobility is not restricted to Insta-worthy travel though. For millennials, leaving their hometown or country is something that is considered part and parcel of adult life, evidenced by the sheer number of this generation in the UAE (according to figures released by the Dubai Statistics Center in 2016, Dubai alone has nearly 1.14 million millennials – a significant chunk of the emirate’s 2.6 million strong population).
These millennials are not averse to owning property either, as shown by the below graph of searches conducted on Bayut.com:
millennial homeownership in the UAE
Yet, when it comes to buying property in the UAE, millennials (locals and expats) lag behind their international counterparts. According to a 2017 report by HSBC, only 26% of the country’s millennials own a home – compared to the 40% worldwide average and much lower than the 70% of Chinese millennials who own property in China.
While one of the reasons for this is commonly cited as being a high entry price barrier, the truth (at least for certain people) can be far less finance-related, and more to do with concerns about job security and if their family own property here (common with long-time expats). According to Dubai born and bred Karishma, 27, while the idea of owning property in Dubai is appealing, she’s unlikely to make any purchases soon, since her family are UAE homeowners, with a villa in Arabian Ranches. She explains that “the villa my parents own has always been considered one of my assets as well, and that’s something that’s especially common with people from the subcontinent. Moreover, given that we bought the villa at a good time for a great price, it’s unlikely that I’ll even be able to afford anything close for a good few years!” She goes on to say that not being legally tied to a house in Dubai also allows her to keep an open mind about other options. She admits that “it would be nice to have a place to call my own, but having the villa gives me a sense of ownership without the hassle.” This may seem like a unique situation, but several of the millennials that we spoke to (i.e.- those who grew up here) echo her sentiments.
In terms of millennials who haven’t grown up in Dubai, Mario Volpi (CCO of Kensington Exclusive Properties with extensive real estate experience) has noticed an interesting trend. “What they (millennials) tend to do is come to Dubai and rent for a few years. Then their roots start to grow in Dubai!” This is when millennials tend to start looking at owning property, “to live in themselves.”
This is something that South African Stephan, 36, can attest to as well. He purchased an apartment in the Dubai Marina for himself at the age of 32 – five years after moving to the UAE. While he did live in the one bedroom flat for a couple of years, one of the reasons for buying it was that he knew as he got older and his family grew out of the flat, a property in the Marina would always yield good rentals, “the Marina is heavily developed and not subject to the same market fluctuations that other newer developments are. The area itself is so well known, it’s relatively easy to find and retain tenants. And back when I bought it, you only needed a deposit of 10%”
buying property in the UAE – financing
As we mentioned before, one of the barriers to buying property in Dubai, especially among millennials, is the price point. When Steve bought his apartment, the deposit needed was only 10%, compared to the 25% it is today (for properties under AED 5M). However, despite the higher deposit needed, Mario Volpi explains that younger millennials tend to make a withdrawal from the “bank of mum and dad”, supported by the fact that 50% of millennials in the UAE seek financial assistance from their parents when purchasing property in the country (the highest of those surveyed by HSBC in the aforementioned report).
However, as the real estate market continues to progress and most likely to cater to the high number of millennials, banks alike are offering attractive options and payment plans catering to the young home buyers.
According to Tariq Abdullah, Head of Islamic Home Finance at ADIB, his bank has listened and responded to the needs of their target demographic – after all, over a third of their customers are under 35. Some of the solutions ADIB has implemented include “allowing customers a six month grace period for their payments; providing them with a constant payment model even when the EIBOR rate increases; eliminating exit fees for selling a house; and offering a Transactional Cost Financing feature, which covers a customer’s registration fees through the use of up to 10% of home finance”. He goes on to say that, “we are also creating an intuitive online platform that is user-friendly and designed to help customers better understand their financing options when looking to make a property purchase. Again, this is specifically targeted at millennials who are becoming increasingly active as more affordable housing comes to market.”
Developers too are responding with more flexible and attractive payment options that are sure to entice millennial homebuyers and also stand out in an ultra-competitive property market. For example, Al Haseen Residences in Dubai Investment Park (DIP) by City Properties is offering buyers a plan that entails paying 30% during construction, 10% on handover and the remaining 60% spread interest-free over the next ten years.
what does the future hold
While the majority of UAE millennials may not be homeowners or home buyers at the moment, the outlook is positive. The HSBC report showed that 80% of UAE’s millennials intended to make a property purchase within the next five years, the same as their counterparts in the USA, higher than those in France (69%) and the UK (74%) and only a few points lower than those in Australia (83%) and Canada (82%). From information provided by the Bayut data team, we can also predict that of the seven emirates, Dubai is currently the most attractive to millennial home buyers.
Mario Volpi also revealed that he predicts that the millennial homeowner and home buyer market will expand as he finds that the “primary market is fast moving (among millennials) while the secondary market is not as popular”. Buoyed by the abundance of information and helpful price indexing tools, millennials tend to prefer off-plan properties compared to ready-to-move-in ones, ensuring that the number of under 35s who live in a home they own is only set to rise.
In terms of the general UAE real estate market as well, stabilising property prices and the abundance of fantastic projects to suit any budget and lifestyle is sure to open up the property market to even more buyers – millennials and otherwise. However, it is always worth noting that any purchase should be undertaken carefully – not only in terms of the buyer’s due diligence regarding the project but also in terms of sensibly and realistically saving up for a downpayment. Furthermore, it is also now possible to pay rent via Ejari direct debit in Dubai.
