Dubai’s property market has been performing exceptionally over the last 12 months. Even though there has been more demand for ready properties, specific off-plan projects, such as Emaar Beach-front, Tilal Al Ghaf and Arabian Ranches, have also seen a substantial price increase in that period. This all makes sense as the Covid-19 pandemic has driven many Dubai residents to desire more indoor and outdoor space, which comes with villas and townhouses.
In addition, Dubai’s excellent handling of the pandemic has driven many overseas buyers to want to invest in the emirate. These buyers are always more attracted to premium waterfront real estate.As a result, we have seen developers focus their new project launches on selling to this demand. This year alone, Emaar has launched five new towers in Emaar Beachfront, three villa developments in Dubai Hills and two new phases in Arabian Ranches 3.
The truly remarkable thing is that all these projects have sold out within a matter of days despite the prices of these projects being in line with what is available today in the ready market. For example, in Arabian Ranches 3, the latest townhouse phase was called Bliss and the three-bedroom townhouses sold for around Dhs1.8m.
For the same money (and maybe even less), a buyer can pick up a ready villa in neighbouring communities like Mira, Serena, or Town Square.So the question that needs to be asked is why a buyer would choose an off-plan property over a ready property when the price would be the same or possibly even higher?
My answer would be that I think many buyers here in Dubai think too short term. They see now that villas and townhouses are in such high demand that they believe that it will undoubtedly continue to rise if they buy now. They fail to see that these projects will take at least three years to complete and handover.
By the time they do, the market conditions may be significantly different from what they are today. For example, the side-effects of everyone wanting more space because of the lockdowns enforced during Covid-19 are likely not to be as prevalent. Many tenants and buyers alike may choose to swap the suburban townhouse for the prime location and excitement of, say, an apartment in Downtown Dubai.
Some may argue that if the buyer is an end-user, it doesn’t matter what the market conditions are later down the line. However, an end-user may still need to fi nance the last instalment of their off-plan purchase, and if their asset isn’t performing well, then they may not get the total financing required from the bank.
Plus, any buyer wants to ensure that their property performs well and that they’ve made a safe investment.That is why I now stress the need with my buyers, particularly those open to buying off-plan, to have a longer-term view of the market. They need to detach themselves from what is in fashion today and think about what the market may look like by the time the property completes.
Sam McCone is the managing director of McCone Properties
Taken from Property Finder’s Prestige special report in Gulf Business’ November issue