The word ‘off-plan’ has been gaining significant popularity in the local property market. For those who aren’t very familiar with real estate terms, an off-plan property is an uncompleted property purchased directly from the developer. By the end of 2021, there are over 124,000 units expected to be handed over across the UAE, which poses the question – how will our economy handle this supply? And while we don’t expect all these units to be handed over on time, it sets the precedent for the volume of residential property coming into the market.
According to S&P Global Ratings, the Dubai economy is expected to grow 2.4 per cent in 2019, a figure higher than last year. This will be off the back of increased economic activity associated with EXPO 2020, with support coming largely from the construction and real estate sectors. It is anticipated that over 25 million international visitors will attend EXPO 2020. Even if 0.5 per cent of the expected visitors decide to invest in the UAE, we will see the projected supply of 124,000 units by 2021 being soaked up. However, the question to ask is – what are we doing to entice these individuals to invest?
Government strategy builds investor and developer confidence
Over the last few years, in the lead up to EXPO 2020, the government has introduced several initiatives to incentivise buyers and ensure projects are adding value to the property market. The multiple visa statuses aimed at increasing long term residents, such as the 10-year visa introduced earlier this year, have been critical in encouraging investment from entrepreneurs, medical specialists and those who have been positioned to be long term contributors to UAE’s economic success.
In addition, investors and developers alike have seen advancements in local regulatory provisions, with new committees set in place to create a balance between demand and supply to safeguard the future of the economy. This strategic move by the government creates a more transparent market, building confidence that the oversupply will not only be monitored, but that it will also be soaked up.
Developers are making it easier for end users to join the property ladder
New projects are led by either the big players in the market or private developers. Some developers depend on selling off-plan units to fund the development or repay development loans, so of course, it’s in their interest to shift units as soon as possible. With softening property prices, increasing demand, and stronger investor confidence, a key trend that we are seeing take off in the primary market is rent-to-own schemes.
These schemes provide a more accessible route to owning a property, particularly for end-users, as it negates the need for large capital, eliminating the barrier to ownership. Essentially, the end-user will be paying the equivalent to what they are paying in rent each month, towards a home that they will own at the end of the 15-year period, making it a much more cost-effective option.
Innovative payment plans to aid first-time buyers and those lacking the capital for a 25 per cent upfront cost in the secondary market are also helping shift the demand for property towards new projects and incoming supply. Trending plans along the likes of ‘Book your home for AED24,000’, ‘Pay 1% a month’ and 10-year post-handover payment plans have become popular pricing schemes amongst several developers.
Property portals play a key role in driving market transparency and empowering buyers
In today’s digitised world, buyers get bombarded with messages and offers from developers online, just as much as offline through traditional marketing and advertising activity. With a comprehensive, real-time view of the market, it is our responsibility to inform investors about its current state to enable them to make well informed decisions.
Online portals arm buyers with a selection of all available off-plan units in one place, displaying as much information as possible about specific projects. This helps compare all options to understand which one is the best including floor plans, construction updates, videos and 360 virtual reality tours.
There is no doubt that off-plan purchases are on the rise and according to the Dubai Land Department (DLD), over 2,200 deals were registered in July 2019 – this is the best month for the primary market since December 2017. As developer and government initiatives continue to pick up pace, we anticipate investors will soak up the supply entering the market.
Matthew Gregory is the director of Dubizzle Property