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Property: Buying off-plan is back on

Greater regulation and a maturing market see interest return to properties still under development

The proper method for inquiring after the properties of things is to deduce them from experiments. ~Isaac Newton

Who can forget the drama and dismay of what happened in the UAE housing market during the global financial crisis of 2008? Aside from global economic turbulence, the “flipping” of off-plan properties was one of the main reasons behind the boom-and-bust cycle back then — and the segment has suffered something of a bad name ever since. However, 2017 saw things well and truly turn around.

In the first five months alone, 7,152 off-plan units were sold in Dubai against the 4,521 units in the corresponding period of 2016, while ready properties at the older communities in Dubai were involved in 5,397 transactions. And things had been building up for a while — off-plan properties accounted for about half of all Dubai residential property deals in 2015-16, according to Reidin.

Buying off-plan is allowing a new wave of investors to take advantage of the current accessible Dubai property prices and get a foothold in the market. Nothing in life is risk free of course, but tighter government real estate market regulations, tough new property laws and a maturing market has taken the fear factor out for many. 

Last year, the total off-plan market for prime residential communities in Dubai was worth Dh16 billion. Downtown Dubai sold the most in terms of off-plan properties (Dh5.8 billion), followed by Dubai Creek Harbour (Dh2.9 billion) and Mohammed Bin Rashid City (Dh2.7 billion).

A penthouse on Dubai’s Palm Jumeirah that sold for Dh102 million was the priciest deal, while two villas at Emirates Hills went for Dh95 million and Dh90 million respectively. A key trend from last year that seems set to continue in 2018 is the strong demand for off-plan in the higher segment, specifically those situated on the beachfront. Most of these developments are slated to be handed over this year or up to mid-2019. Existing developments are getting tired and buyers are looking for something new, exciting and modern.

If all this is making you consider dipping into the off-plan waters, there are still some things to consider. Buying off plan has its risks and rewards. The main benefit is typically the price as developers usually offer between 10 and 30 per cent lower prices. The closer to completion, the higher the price usually becomes.

As a prospective buyer there are currently plenty of enticing promotions — “Book now with Dh5K”, “Pay just 10 per cent and move in”, “Pay 50 per cent now and 50 per cent two years after completion” are just some of the advertisements that have been seen around town. If it all sounds too good to be true it isn’t necessarily.

It’s just worth remembering that if you buy off-plan a common scenario is that the project will be delayed — for whatever reason. But unlike the crazy days in the lead-up to 2008, off-plan payment schedules today should be linked to construction milestones so the part of the risk relating to delayed handovers is somewhat mitigated. 

Another point to think seriously about is your own financial circumstances — could they change?

When buying a property off-plan you need to pay 20 to 80 per cent during construction with the rest due at completion. Most common these days are 50/50 payment plans. If you require a mortgage to complete, think about the fact that you might lose your job, interest rates might increase, or the banks may alter lending policies. And even if you qualify for a loan, the bank may not lend you the funds you require.

To avoid this risk, choose developments where you can apply to borrow up to 50 per cent of the purchase price that is preapproved at the time of application and is guaranteed to be paid at completion. So regardless of what happens to your personal financial situation, assuming of course you can pay 50 per cent in cash, you can be confident of getting the funds you need to complete the purchase. 

One of the biggest things to think about is quality. The mock-ups for your off-plan dream house may blow your mind, but what will the delivered product look like? Reputation is everything, so play it safe with firms known for great finishings and attention to detail.

Of course, no property purchase is risk free — no investment really is. But when it comes to the UAE off-plan market, things aren’t what they used to be. Which is good news for all.

The writer is sales director at the portal PropertyTrader.ae

The proper method for inquiring after the properties of things is to deduce them from experiments. ~Isaac Newton

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