Affordable housing given breakthrough by partnership

The arrival of a new fund, Mubadala Pramerica Real Estate Investors, to invest in the middle-income housing market is a significant step in the development of Abu Dhabi’s property sector.

Since the rush to build began in the capital more than three years ago, the focus has been on the high end because such properties brought the greatest return for developers. But with the onset of the global financial crisis and the regional property downturn, these homes have lost some of their appeal for developers.

Rising default rates coupled with declining prices have led to hard times for property companies, many of which suffered a dramatic fall in profits since their heyday in mid-2008.

Analysts point to the middle-income sector as the largest driver of demand for homes. No longer are buyers looking to pay deposits on homes, only to resell them at a profit months down the line. The calculus has shifted towards people who see that buying is more affordable than renting.

“The demand is huge,” said David Dudley, the head of the Abu Dhabi office of the property consultancy Jones Lang LaSalle. “The overall market is going to become quickly oversupplied in terms of luxury product and undersupplied in terms of affordable housing.”

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