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Recent property market trends in Dubai indicate that the rising demand for off-plan or under-construction properties has forced prices of houses in the secondary market to come down drastically. Most of the recently launched off-plan properties have taken place in Dubailand with other popular destinations being Dubai Silicon Oasis (DSO), Jumeirah Village Circle (JVC) and Downtown Dubai. Driven Properties founder and managing director Abdullah Al Ajaji explains the reasons why off-plan properties are being preferred by homeowners.
Demand for off-plan properties has risen significantly. This is because there is inherent leverage (financing) in off-plan purchases. Developers are now coming up with schemes that have lucrative payment plans that stretch to 30 per cent during construction and 70 per cent at handover and beyond handover. This has become common and is more relevant in affordable communities. “Buy now pay later” is a growing trend in finance options available to buyers.
Secondary market demand for property has been relatively subdued since the beginning of this summer. With finance being more tight through new Central Bank regulations, fewer end-users can afford the large down-payments, and investors are shifting focus towards off-plan properties by reputable developers with easy payment plans.
Recently, various affordable residential projects in Dubailand and International Media Production Zone (IMPZ), and developments in the eastern side of the city have been successfully launched. The upcoming areas where we feel that there is huge potential for growth include IMPZ, Dubailand, JVC, Jumeirah Village Triangle and Jebel Ali Hills.
New infrastructures are being built to create new amenities for the residents in these areas. We are also excited about the new entertainment and lifestyle destinations being built like the Dubai Water Canal, Dubai Parks & Resorts and Bluewaters Island, which will have the Dubai Eye, the world’s largest Ferris wheel.
As per the master plan of the Dubai Water Canal, a waterway will connect the Arabian Gulf to Business Bay. New residential communities, retail hubs and hotels will be built along its course. The project is expected to be completed in 2020.
Affordability is the new buzzword
Some developers are offering monthly payment schemes where 1 per cent of the property price is repaid every month. Others are offering 30 per cent during construction, 30 per cent at handover, and 40 per cent over four years after handover. The only developers that get away with normal and less-friendly payment plans are large developers.
Many developers are targeting individuals within the monthly salary bracket of Dh15,000-25,000 to buy their first home.
Affordable housing is the trend at the moment. A larger percentage of the population in Dubai falls within this bracket. Developers are now starting to cater to this segment of the population as demand for such brackets increased substantially in the past five years.
This does not mean that the demand for luxury projects will wane. There is always a market for this niche segment. Dubai has always been a preferred destination for high-net-worth individuals and wealthy investors. The upcoming areas for luxury living include Dubai Hills in the Mohammed Bin Rashid City (MBR City) alongside new beachfront communities built in Jumeirah Bay Island and Pearl Jumeirah.
We believe property prices have come to a point where buyers and sellers are now in agreement and equilibrium has been reached. The evidence of that is that generally, rentals have not come down and yields are now more attractive for prospective buyers.
We think that it may take some time for prices to bounce back, but we certainly do not see any additional downside from here.
We may go through a period of stagnation in terms of price movement and move upwards towards mid-next year. We believe the next six to nine months will be an ideal time to invest or buy (for an end-user) as prices reach equilibrium and as yields improve.
The numbers game
• 50% of Dubai’s total households earn between Dh9,000 and Dh15,000. They can afford rents between Dh32,500 and Dh54,000 per annum
• 35% of Dubai’s households have monthly salaries of Dh15,000-Dh25,000 and can afford rents between Dh54,000 and Dh90,000 yearly
• 15% of Dubai’s population has a monthly income of Dh25,000 and above and their rental affordability starts at Dh90,000 annually
• 60% of freehold apartments in Dubai are priced below Dh1 million
Source: Colliers International
Source: S. Dhar, Special to Freehold
The writer is a freelancer