"Saturated" is the word sometimes used to describe the future of the UAE real estate market, especially when considering the dizzying number of high-end units currently being built in Dubai.
As a result, some developers have reconsidered operating under the "luxury only" banner and have initiated projects for more modest income earners.
Tameer Holding, the Sharjah-based real estate company, has been one of the first to start thinking out of the box. In early February, the company signed a deal to develop 7000 low-cost units in Jordan, which will be developed between Amman and the northern industrial city of Zarqa.
"Our latest residential project is being specially designed to cater to investors with limited income," Omar Ayesh, president of Tameer Holding, recently told the press. "We believe that the residential development will help meet the growing demand for quality, cost-effective residential space in Jordan."
Other UAE companies, like property giants Emaar and Dubai International Properties, have certainly looked beyond the borders of the emirates, entering such markets as Morocco and Turkey, but few companies have taken their services abroad to build for low-income earners.
Tameer has also bucked the trend inside the UAE by targeting medium- to low-cost housing in Dubai. The company is involved in developing Dana 1 and Dana 2, two projects in Dubai International City, one of the only developments to create modern living space for Dubai's working class.
Even more unusual is Tameer's move into the northern emirates where land values remain low, but still have the proximity to access business in Dubai. Tameer is the first developer to target the small emirate of Umm al-Qaiwain, where it will build Al Salam City, a massive industrial zone complete with offices, factories and housing.
Land prices in Umm al-Qaiwain are around a tenth of those in Dubai. In the northern emirates there are also plenty of opportunities where cheap land is available - and the local governments would accept foreign investment with open arms.
Tameer hasn't turned its back on high-end developments, however, as it is also building the Princess Tower, the tallest and most prestigious tower in the Dubai Marina, which was Dubai's first luxury development.
"We are looking to supply for all different segments," Ayesh told OBG. "If there are shortages in the market in affordable housing, we will supply for that."
Clearly the UAE is going to need low-cost housing in the future, but how soon that happens depends on the health of the market. Pundits have been casting a wary eye at Dubai's real estate building frenzy in the past four years, waiting for the bottom to fall out - which so far has not happened.
Despite what many expect to be a massive correction, builders in Dubai are confident that the city will grow from 1.5m to 5m by 2020, requiring a huge supply of housing and office space, which is already severely stretched. With projects like Dubai International Financial Centre hoping to house 45,000 people, Dubailand intending to help draw 15m tourists and Dubai Medical City looking to serve a region of 2bn, optimists are sure that all high-priced capacity will be easily filled.
Numbers are always uncertain, but experts predict that anywhere from 200,000 to 300,000 new units, mainly on the upper end of the real estate spectrum, will be delivered to the market in the coming 3-5 years.
If developers like Tameer are right, then real estate will become a more balanced and mature market.
"2004 and 2005 were golden seasons for Dubai," Ayesh told OBG. "The margins were extremely high - I know people who were making 1000% on investments."
Those days, he says, are now over, and 2006 will see a return to normal in the market. This has prompted Ayesh to look into projects that will be available to a wide range of income levels.
The levelling of the property market, experts indicate, is the result of the rapidly increasing price of land. Plots that were bought on the cusp of Dubai's building boom in 2001 for Dh15m ($4m) are now worth AED250m ($68m). There is still plenty of money to be made, but realistic returns are likely to be around 20-30%, rather than the through-the-roof percents that were seen even last year.
The other issue is developers' insistence on targeting the luxury niche market. Since land values tend to be so high, top-end projects in tower blocks tend to be the surest investment in terms of cost per square metre.
Many of the mixed-use developments by their scope are only equipped to handle luxury tenants.
"You can't do affordable housing on reclaimed land," points out Sultan bin Sulayem, chairman of Nakheel, the government-owned company in charge of the offshore Palm Islands, The World and The Waterfront projects.
Meanwhile, rents in the emirate have continued to rise. In 2005, rents increased by an average of 50%, while salaries rose only 6.5% to August 2005, according to a recent Reuters report. This has priced a lot of people out of Dubai, even though rent rises have now been capped at only 15% per year, a figure still not in line with wage hikes.
In 2006, more luxury accommodation will arrive on the market, and ordinary rents are sure to rise, putting the strain on more moderately salaried residents. With no taxes, there is still a lot of padding in many salaries to absorb these hikes, but developers would be wise to start looking into the neglected northern emirates to develop cheaper, and untapped, opportunities.