Why it is the right time to buy off-plan properties
Demand for off-plan property in Dubai has been staying strong which reflects that the steady growth momentum in the property market will continue in the foreseeable future.
The off-plan segment has played a big role in driving the uptick in Dubai’s real estate market, jumping to 58 percent of the total number of sales transactions and 50 percent of total transaction value in August. The volume of off-plan property sales rose by 63 percent year-on-year, with 6,837 transactions recorded, compared to 4,189 in August 2022. While the value of off-plan properties surged by almost 103 percent to Dh17 billion, vastly surpassing the Dh8.26 billion recorded in August 2022.
Ten areas, as per Property Finder, contributed to almost 65.3 percent of the total sales value and 53 percent of the total number of transactions in the off-plan market. These included perennial favourites Business Bay, Dubai Harbour, Dubai Creek Harbour, Jumeirah Lakes Towers, and Jumeirah Village Circle, as well as newcomers Sobha Heartland, Al Yufrah 1, Arjan, Jumeirah Village Triangle, and Madinat Al Mataar.
While top five off-plan transacted areas, in September, were Dubailand, Mohammed bin Rashid City, JVC, Business Bay, and Dubai Marina.
“The off-plan segment is witnessing an unprecedented surge,” says Cherif Sleiman, chief revenue officer, Property Finder.
The local property market has been witnessing a renaissance in the post-pandemic period with both apartments and villas recording a massive demand.
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The majority of the industry players believe that the off-plan market will continue to drive and dominate the local property market in the foreseeable amidst a slowdown in the secondary market.
Selling like hot cakes
As a result of unprecedented demand, both public and private developers have been aggressively launching projects. In 2023 alone, more than Dh110 billion worth of projects have been launched in the emirate of Dubai, including Dh73.4 billion The Oasis by Emaar and Dh30-billion mixed-use desert oasis community project Venice by the Azizi Developments.
In addition, private developer Danube Properties launched five projects in 2023 with Dh2.5 billion Oceanz’s first tower being sold out soon after the launch. It successfully sold out all of its projects launched this year. Similarly, master developer Nakheel Properties’ first set of villas on the Palm Jebel Ali was launched and sold out on day one.
Importantly, most of the newly-launched projects by the developers have been either fully or largely sold out in the first few weeks of the launch this year, which is an encouraging sign that foreigners and residents still expect good returns in the foreseeable future and this is helping maintain sustainable demand for the off-plan properties in the emirate.
This unprecedented demand for off-plan properties has been encouraging foreign developers to foray into the local market and offer diverse offerings to buyers. Many European developers mainly from the UK, Italy, Switzerland, Turkey, and France have entered Dubai’s residential property market in the past year.
Why is it a good time to invest?
Buying off-plan properties allows investors to purchase a property at a lower price compared to completed units. In addition, off-plan properties typically offer flexible payment plans, which can be advantageous for investors. Considering a post-handover payment plan is a great way for customers to minimise the risk of delays, as the responsibility to complete the project on time rests with the developer, who receives a major chunk of money post-handover. However, each project differs, and understanding the payment schedule, associated fees, and financing options available is crucial.
In this current market, it is a great time to invest in off-plan properties for several reasons.
Firstly, the current landscape of rising mortgage rates has altered the viability of purchasing ready properties for investment purposes. Despite increased rental yields, the costs associated with servicing a mortgage have surged, resulting in diminished net yields after factoring in all expenses. Consequently, the economics of investing in ready properties for returns have become less favourable.
Secondly, off-plan investments offer a distinct advantage by enabling investors to allocate funds towards properties still available at their original prices. The flexibility of payment plans mitigates the impact of high lending rates, ensuring greater adaptability in managing finances.
Lastly, Dubai's population growth serves as a crucial catalyst driving the demand for residential properties. The UAE government has implemented various initiatives to foster population growth in Dubai, attracting a steady influx of individuals. Remarkably, properties are experiencing record-high occupancy rates, reaching 95 percent for freehold properties and 97 percent for leasehold properties. This trend indicates a sustained demand for rental properties.
Outlook
With Dubai's ongoing development and the steady rise in population, off-plan properties hold significant potential for appreciation in value by the time they are completed.
“The outlook for Dubai's off-plan market is promising and optimistic, witnessing a notable surge in interest, with a 40 to 60 percent increase in the number of foreign and local property buyers. This growing interest from investors and end-users indicates a favourable environment for real estate investment in the emirate,” .
However, it's important to note that various factors can influence the real estate market, and trends may shift over time. Currently, the overall landscape suggests a positive trajectory for the off-plan market in the emirate.
“Another critical aspect to evaluate before investing in an off-plan property is the reputation and track record of the developer. It is important to look for experienced and reputable developers with a history of successfully completing projects on time and delivering quality constructions. This can help mitigate the risks associated with delays, project cancellations, or substandard construction”.