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New residential districts and innovative payment plans have been the new game changers in the real estate story of Dubai. Dima Isshak, Research Manager at Cavendish Maxwell, tells us more about the emerging trends in Dubai’s property market.
Existing and off-plan developments in locations such as Dubai Marina, Downtown Dubai, Jumeirah Lakes Towers and other established residential areas have nearly reached full capacity. New developments launched in the first half of 2015 are bringing into play emerging areas such as Dubai Silicon Oasis, Mohammad Bin Rashid City (MBR City) and Dubai World Central (DWC). We are seeing some first-tier developers launch new master developments such as Dubai Creek Harbour and Dubai Hills Estate.
With Dubai’s developments extending inland from the coast, the introduction of these new areas and residential projects is creating a market shift. Buyers are seeing opportunities to purchase in these developments where the price point may be lower than those located in more central locations. There is potential for growth in areas such as DWC and the surrounding areas, with the airport getting more established. This creates an attractive long-term investment for residential projects launched as these become increasingly populated and established.
In Q2 2015, average apartment sales prices in Dubai showed a marginal decline of 2 per cent, consistent with the decline in Q1 2015. Whilst the majority of areas showed slight declines this quarter, we have seen that established locations such as Downtown Dubai, The Views and The Greens had an accelerated rate in decline in Q2 2015 in comparison to Q1.
In Q2 2015, average villa prices declined at a rate of 2.4 per cent market wide, a slower decline from the 3.2 per cent recorded in Q1 2015. Prices in The Springs have dropped the most in Q2 2015 (6 per cent quarter on quarter and 16 per cent year on year). Although rental rates and occupancy levels are stable in this community, new buyer demand has been shifting towards secondary villa locations such as Jumeirah Village Triangle (JVT), Green Community and Al Furjan as buyers look for more value for their money.
The combination of more choices and flexible payment plans in the off-plan villa market has slightly shifted buyers’ attention away from established villa locations.
Secondary locations such as JVT, Jumeirah Village Circle and Dubailand are still evolving as more de-velopments are completed and launched. While the infrastructure within these communities is adequate, accessibility may be inferior compared to other locations. However, there has been a recent trend of commuter-tenants or end-users willing to travel farther from where they work. Therefore, these locations are progressively gaining more attention from buyers and renters.
Attractive payment plans
Alongside the significant number of launches throughout the first half of this year, developers have introduced different types of payment plans to encourage buyers, both investors and end-users. Traditionally, payment plans were 10 to 20 per cent of the property value as a down payment, followed by three to four installments of 10 to 15 per cent connected to construction and a final payment of 50 per cent on completion.
We have seen some developers shifting away from these “heavy payments” to more “buyer friendly” plans, encouraging buyers who may have previously wanted to purchase a home but could not afford the installments. New payment plans introducing monthly installments, sometimes extending beyond completion date, have encouraged first-time buyers by providing them with a more viable investment. For example, following an initial 20 per cent down payment, 30 per cent of the property value is paid in monthly installment of 1 per cent over a course of two to three years. The remaining 50 per cent is payable upon completion. Other payment plans extend the monthly installment beyond completion and handover, allowing the buyer to rent out the property while still making these payments.
• Although the market prices have been gradually declining over the past year from the market peak in Q2 2014, we do see buyers being more cautious and taking their time before making a purchase decision. With the significant number of off-plan development choices and flexible payment plans offered, these can be an attractive option to buyers with a long-term outlook, looking to purchase developments that will deliver in the next two to three years. Buyers have strong negotiation power in the current market and should use this to their advantage to secure the best deal for their investment.
Source: S. Dhar, Special to Freehold