Property investors in Dubai are apparently in a rush to sell their off-plan units rather than wait for a better time when they were initially hoping to make better profits. This shows concern in investors’ sentiment that the market will only slow down in the future, causing them financial loss as they already paid at least 30 percent of the property value. For some, the main reason is also lack of funding, as cost of living in Dubai firmly increases and banks don’t offer mortgages for off-plan projects. In addition, property developers are racing to launch new residential projects of all sorts in all parts of Dubai.
There has been a surge of at least 20 percent in off-plan property resale offers in March, according to realty specialists who point out that high-end units in premium locations across Dubai are even less attractive to investors right now. Instead of keeping pricier off-plan properties in order to earn more in a few years, investors are trying to get rid of them. In the secondary market, now they can find cheaper units which are already generating income. Off-plan property investment has been seen as very lucrative in the past couple of years in Dubai due to the continuing demand and increasing real estate prices. However, it’s also a riskier one and along with the cooling of the market after measures were taken by the government, the strong supply of new projects by developers will reduce value of off-plan units. High geopolitical risk contributes to the lack of demand.
The current off-plan secondary market activity in Dubai is extremely slow. The fewer interested buyers means the owner might be forced to sell at a lower price than he already committed to. According to Dubai developers’ requirements, investors had paid between 30 and 40 percent of the property value, but now some developers are adding “no restriction on resale” to their offers. Paying the 4 percent Oqood charges in addition to a reduced sale price may contribute to the partial loss of the initial investment. And this could be the best case scenario, as interest from buyers is mildly said “fading”. This is evident from the numbers for the first half of March, when there was a 45 percent decline in transactions from the previous month. Compared to 2014, this is a drop of over 70 percent.
This means that buyers may be in a significantly better position right now than they were last year. They will now have a greater chance to buy an off-plan property at a lower price, even if it’s in the high-end spectrum. That is, of course, if they are willing to take the general risk, associated with this type of real estate investment in the first place. Sellers on the other hand may need to wait longer if they want to avoid losses in the transaction.
The secondary market is currently in a far better condition. Distressed properties are selling fast at prices below the market average. The typical buyers are end-users who are bargaining hard for studios, one or two bedroom apartments. High-end properties are not much in demand and their prices are expected to decline further. Rentals across Dubai are also on the decline, with larger units remaining empty for long.