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Investing in off-plan property in Dubai is very profitable as long as you follow the necessary steps to help you during the decision-making process. It is worth noting that the market is currently not at its peak, but rather at the lowend, so it would be correct to say that prices are also low. Hence, now is the right time to buy.
Your objective when buying a property has a major impact on the search and qualifying process.
• Buying to sell on handover. Ensure that your entry point is at the very start of the project to achieve maximum appreciation once the project is handed over. Avoid buying just prior to handover, assuming a potential price boost. Many investors target to sell on handover and this can potentially create an oversupply and consequently a short-term price decrease.
• Buying to exit halfway through the development. Identify how many similar units or properties the developer will continue to supply. They can offer better payment plans and prices that you will not be able to compete with.
• Buying to resell to endusers. Ensure that your property meets the standards of livability of your targeted segment of end users.
• Buying to resell as an income-generating property. Make sure you target a resale price that will still generate a decent income in light of anticipated annual rent, which should ultimately make it an attractive proposition for a new investor.
Decide on the type of property you wish to buy, whether low, mid, high-end, residential, office or retail. This again should be in line with your objective. For example, if the target is to resell as an income-generating property, the investor is most likely to choose a low to mid-end property, generating 7-10 per cent net annual income. High-end properties are likely to generate a lower net annual income making the property less attractive from an income-generating viewpoint.
One of the most important factors to consider when investing in an off-plan property is to evaluate the location. Look at landmarks, schools, malls and the community in general. Accessibility is also critical.
There are two broad options: you can invest either in a project within an underdeveloped master community or in a project within a semi or fully developed master community.
For medium-term investment, we would recommend semi and fully developed communities. It is usually not advisable to invest in underdeveloped master communities unless your entry price justifies such investment as it can take up to 10 years for the community to develop.
To evaluate the price and to deem it reasonable for investment, you should always ask: How can I get the best value for my money? In order to do this, you must consider the following:
• Prices of similar apartments or properties in the area to be able to make a comparison
• Cost of land plus cost of construction versus selling price
• Historical prices in the property area
The payment plan is vital because it often has a knock on effect on the price — better payment plans mean higher premiums and vice versa. To decide on the best payment plan, consider:
• Your liquidity position as an investor. Make sure you can meet all payments in the scheduled period. It is the ability to make payments in line with personal liquidity forecast that will achieve your overall objective.
• Your resell plan. If your plan is to resell prior to completion, your best option is to choose lower initial payments during construction and then a higher amount upon handover; you are then able to capitalise on the small down payment.
Finding reputable developers is crucial, however, they do not have to be ultra-prestigious, just well established. In other words, do not pay a premium just for the sake of buying from a branded developer. Once the property is ready, all that matters is how well it is built and serviced. An excellent track record of delivery as per agreed quality and standards at the project launch is also imperative. There are a lot of small but strong developers in Dubai and spending some time investigating them will be worthwhile.
Real estate broker
Experienced brokers will be able to provide advice based on common sense, facts and real market fundamentals. They can also have experience in dealing with several projects from different developers, hence investors can get advice on different projects to match their needs. Ideal agents are those who intellectually and genuinely appreciate the enormous value in building long-term relationships with investors.
Find out the reasons why you should invest today
Source: Firas Al Msaddi, Special to Property Weekly
The author is CEO of Fam Properties