Shaken off-plan property investors head for the exit door

Shaken off-plan property investors head for the exit doorImage Credit: Supplied

There has been a sharp increase in the number of off-plan properties being put up for sale in Dubai's secondary market, indicating again the tightness in investor sentiment that has crept in over recent weeks.

Owners of these units apparently believe trying to sell now will better protect their exposure rather than holding on to them. In the last four weeks, the incidence of such activity has shot up by 20 per cent, according to market sources.

On most of these off-plan secondary market listings, the investors had paid 30-40 per cent of the property's value, as per the strict requirements Dubai's leading developers had in place to curb speculation.

''It's the high-end off-plan properties — priced at Dh1,500 per square foot and over — that are figuring most prominently in the recent secondary listings,'' said Sameer Lakhani, Managing Director at Global Capital Partners (GAC).

''This applies [not only] to off-plan units in Dubai Marina and Downtown but [also] off-plan releases in some of the other premium locations in Dubai are seeing attempts by investors to sell-off rather than hold.

Trading phase

''What investors are doing here closely mirrors what their counterparts holding high-value assets have been doing in India or Singapore once the realty market enters a difficult trading phase.''

But such investors may not be in a position to find ready buyers. Apart from the reduced transactional activity taking place, they have to compete with trying to sell their units against those developers who keep launching new projects within the same clusters.

''In the last few months, off-plan secondary market activity has been nonexistent and more so at the higher end of the pricing spectrum,'' said Chandrakant Whabi, CEO of Acrohouse Properties. ''There is zero per cent premium available on off-plan units launched in 2013 and 2014 — if investors are lucky to find buyers, they may have to sell below what they bought in for.

''If we assume that the seller has to drop the price by 2-5 per cent and pay the 4 per cent Oqood charges, it means that he will see a one-third erosion in the capital — 30 per cent of the property value — he originally bought it for in 2013 or 2014. And that's quite a sizeable loss he's absorbing — always provided he manages to find a buyer. There are less of them around.''

The March numbers do seem to confirm this is the case. According to numbers provided by GAC, there were 478 transactions in Dubai's residential market between March 1 to 15, down by more than 45 per cent compared with the February numbers. In a year-on-year comparison, the decline would be plus 70 per cent.

''The drop in buying activity is substantial within the high-end space, by more than 60 per cent,'' said Lakhani. ''Clearly, investors are taking a breather when it comes to committing funds to property. They are the ones who expect a quick upside to their entry prices and find that's not going to happen now.''

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Source: Manoj Nair, Associate Editor,


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