Dubai’s off-plan launches in recovery mode

Dubai: A quite sizeable 2,513 off-plan units were released in Dubai during the first three months, indicating that developers are shrugging off the inertia brought on by a market yet to revive itself in full. The Q1-16 closely tracks what the market saw during the same period last year.

But this is where the similarities might end. Last year, developers took their foot off the accelerator with new launches as both sales and property values came under tremendous pressure. Eventually, the year closed with 20,000 units released.

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But with the pace of activity already picking up in the first quarter — led by master-developers such as Dubai Properties (which came out with the instantly sold out Serena Villas) and Emaar and private ones such as Nshama and Azizi — off-plan launches could easily cross 20,000 units, industry sources say.

The launches have been fast and furious this month, though official stats are still being collated. (April’s most significant launch, The Tower from Emaar, and Dubai’s next tallest structure will not, however, have a freehold component.) The best part is that off-plan launch prices have not seen any sharp markups in the secondary market, and which would have hurt market dynamics just as the worse seems to be over. In another plus for the longer term stability, the steep discounts that were being offered last year in secondary market transactions are also no longer there. The move to stability is thus gaining traction.

Developers with new launches are also playing it mighty smart — more of them are now offering split payment plans, with the bulk of it to take place after the handover. And with the added comfort of two or three years post-completion. To juice up the offers further, some developers even have interest-free instalment plans.

“While it is too early to state how they (the off-plan sales) are faring, what we are able to ascertain is there has been somewhat of a pickup in the response to these launches,” said Sameer Lakhani, managing director of Global Capital Partners, which issued the data. “The increased response has been a function of post-handover payment plans, a select reduction in launch prices, as well as improvement in the overall economic sentiment.”

Where developers are able to offer a pricing more in sync with buyer sentiments, they have been able to generate a good deal of support. “Price declines are stimulating demand and bringing the market to equilibrium, perhaps far quicker than most would have anticipated,” Lakhani added.

The interesting aspect is that demand for ready properties is also on the mend. In fact, this is where end users are most likely to be seen as they seek out homes that fit in with their budgets. Locations such as Sports City, Jumeirah Village Circle and Emirates Living are up 30 per cent in transactions in Q1-16 from a year ago.

But Kalpesh Sampath, chief operating officer of SPF Realty, suggests off-plan is where price appreciations are most likely to be seen in future. “If you invest in the right off-plan, the capital gain is significantly higher annually compared to ready property appreciation,” he said. “Some developers in the current market are even offering attractive, flexible post-handover payment plans. Banks also provide support towards the end of the payment plan, usually after you have paid 50 per cent.

“Most of the demand has been in the low- and mid-segment space … mainly for Dh700-Dh900 and Dh1,000-Dh1,200 per square foot. However, the real estate market in Dubai has indeed become a lot more stable in Q1-16 as compared to 2014 and 2015. Overall, transactions have increased as more buyers have realised that the market, in terms of pricing, has bottomed out.”

A tale of many market dynamics

With master-developments such as MBR (Mohammad Bin Rashid) City, Meydan One and Culture Village seeing more launches, as well as those happening near Dubai Canal, the average off-plan launch prices are on the up. Even then there are price gaps that a canny investor can make use of.

“When we look at the Downtown area, for example, off-plan products are trading at between a 20 per cent discount to a 10 per cent premium to the ready market depending on the stage of the project,” said Sameer Lakhani of Global Capital Partners. “In Arabian Ranches, the discount factors are much tighter, with prices being traded at a slight discount (2-5 per cent) when compared to the ready space.”

In Abu Dhabi, off-plan sales had a major lift this month with Aldar Properties launching Yas Acres and to feature 1,315 villas from Dh3 million plus. The recent Cityscape Abu Dhabi also saw other developers piling on with new releases.

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Source: Manoj Nair, Associate Editor, gulfnews.comGN


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