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Home / Features / Developers reduce unit size to make homes affordable

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Developers reduce unit size to make homes affordable

Developers in Dubai have been progressively reducing the unit size to make properties more affordable for investors and end-users, reveals statistics from the Research and Data Team at Property Finder. However, the average price per square foot has progressively increased over the years. Analysis of transactional data of both ready and off-plan properties, mostly apartments, in 2015 and 2019 by Property Finder, the MENA region’s leading property portal, reveals this trend at play.

Based on a comparison of 28,000 apartment transactions in 2015 and 2019, the average size of an off-plan Dubai studio transacted in 2015 was 480 sq ft and has reduced to 406 sq ft in 2019. Similarly, the average size of an under-construction 1 bedroom apartment sold in 2015 was 845 sq ft, which has shrunk to 670 sq ft today.

Two bedroom apartments are not immune to this trend either, with transacted off-plan unit size reducing from 1,300 sq ft in 2015 to 980 sq ft this year.

This is a strategy deployed by developers to reduce the overall ticket price and thereby attract new customers.

However, in comparison, the average price per sq ft for an off-plan studio sold for AED 1,409 in 2015 has increased to AED 1,630 in 2019. Similarly, a 1 bedroom off-plan unit that transacted for AED 1,161 in 2015 is being sold for AED 1,363 today.

To summarise, units have reduced in size but become more expensive over the years.

While this trend is unlikely to affect yield-seeking investors in the short term, they must remember that smaller properties might not appeal to tenants in an oversupplied market. Around 41,000 homes are slated to enter the Dubai market in 2019 while 28,000 homes were handed over last year, according to Property Finder research.

“It is imperative for investors to know what they are getting into when buying off-plan, especially with smaller units being the current trend. If their exit strategy is to sell once the unit is handed over, they might struggle to find a buyer in the secondary market which has been driven by end-users over the last year who have intrinsically become more savvy and have many options to choose from,” says Lynnette Abad, Director of Research and Data, Property Finder.

End-users also need to watch out while buying off-plan since a reduction in unit size will affect the livability of properties.

Communities in the spotlight
Communities like Business Bay, Dubai Hills Estate, Meydan and Mohammed Bin Rashid City are where several off-plan projects are seeing a reduction in size.

For instance, in Business Bay, 1 bedroom apartments currently being transacted off-plan are only the size of a studio sold 4 years ago (around 600 sq ft). An off-plan studio in the community measures only 454 sq ft today.

Meanwhile, in Dubai Hills Estate, Meydan and MBR City, off-plan studios have shrunk from 539 sq ft in 2016 to a mere 372 sq ft today. This is a little more than the average size of a mid-market hotel room in Dubai (circa 270 sq ft).

Off-plan 1 bedroom apartments have seen a big reduction in size: from 941 sq ft to 590 sq ft in the span of four years. This is based on a comparison of 1,000 off-plan apartment transactions in 2015 and 2019.

Al Furjan is also no exception to the rule, with off-plan apartments seeing a reduction in size.

However, developers are mostly launching serviced apartments in communities like Business Bay and Al Furjan to target the Expo 2020 visitors. This could be one reason why they are bringing on smaller properties to the market.

Price-wise comparison
In terms of pricing, the size of an off-plan apartment under Dh1.2 million on average has reduced from 909 sq ft in 2015 to 682 sq ft in 2019, according to DLD transactions. The size of an apartment in the secondary market under Dh1.2 million on average has, however, increased from 826 sq ft in 2015 to 964 sq ft in 2019.

Transacted off-plan apartments priced between AED 500,000 and AED 1 million have seen their size reduce from an average of 741 sq ft in 2015 to 593 sq ft in 2019.

And off-plan properties worth between AED 1 million to AED 1.5 million that transacted in 2015 spanned 1,062 sq ft while today they extend across 800 sq ft only.

This trend rings true for all price segments. Off-plan apartments ranging all the way over AED 3 million have seen their sizes shrunk to reduce the overall ticket price.

Townhouses no exception
Villas and townhouses have also seen their size shrink. Based on a comparison of 2,275 transactions in 2015 and 2019, the size of transacted ready 2 bedroom villas/townhouses reduced from an average 2,620 sq ft in 2016 to 2,046 sq ft in 2019. While the size of transacted ready 3 bedroom villas/townhouses has shrunk from 2,836 sq ft to 2,374 sq ft across 3 years.

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