Perspectives of the off-plan real estate in Dubai in 2023

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Property for sale in the centre of Dubai attracts the constant attention from the investors. Let’s have a look at the state of the off-plan properties on the Dubai real estate market in 2022 and their perspectives in 2023.

Property in Dubai

Dubai developers have responded to a sharp increase in demand with an increase in supply in the off-plan market. Already by November, according to RERA, the share of off-plan transactions reached a record high for 12 years – 47% of the total number of transactions in the real estate market.

Most off-plan transactions in Dubai in 2022 were for the purpose of flipping (investments with the aim of reselling the property in the short term).

Investment in off-plan property in Dubai

A feature of the off-plan project market in Dubai is that after the start of sales, the developer does not have the right to change the price of properties. Such an approach, taking into account the developers’ large budgets for advertising, on the one hand, puts the flipper investor in a disadvantageous position – the buyer would rather buy a real estate from the developer than from a private investor. But, on the other hand, successful properties in top locations are sold out very quickly by developers. At the start of sales, in order to book housing, it is enough for an investor to pay 10% of the cost of an apartment or villa. Having paid another 14% to 24% (including 4% – state duties), the investor receives the right to resell the housing. The further payment schedule depends on the specific developer – many of them provide buyers with interest-free instalments for several years.

·      There is a war between developers for the buyer and a convenient payment plan is one of the main tools. There are projects with repayment of 30-50% of the price within 3 years after completion.

·      Another relevant benefit of flipping is the ability to use cash. The investor pays in cash, and in a few months he can sell the real estate and receive money in the account.

·      An investor does not need to invest in apartment renovation – in Dubai there is no concept of “rough finish”, sometimes apartments are sold even with design and furniture from fashion brands (for example, the DAMAC project with Cavalli interiors).

·      Off-plan brokers and agents often promise investors 15-20% per year flipping profits. For “wholesale” buyers, to whom developers give an additional discount, the profit on the final sale can reach up to 40%. And there are quite a few such wholesale investors: according to brokers, almost one in ten buys an entire floor of a residential building in Dubai, that is, 10-12 apartments. On average, the cost of such a purchase is $5-7 million.

However, aggressive advertising campaigns often mislead buyers, giving no real information about either the developer’s reputation, or the quality of construction, or the financial terms of the deal. As a result, it is not uncommon for investors’ investments not to bring the expected income or to be “frozen”.

Some buyers are so captivated by marketing slogans like “1% per month” that they do not fully understand the details of the payment plan. It is worth paying attention to the amount of the payment, after which the keys will be handed over to the owner, and not just the right to resell the apartment. Handing over the project, he will receive the keys to the new studio. The investor planned to repay the remaining payments by renting out the apartment. Later it turned out that the keys would be handed over only after payment of 60%, which radically changed the situation. The apartment, bought in 2021, ready to move in from the end of 2022, “hung”. The investor cannot sell it, because cannot not only show the apartment, but even take a photo.

Among other weaknesses of off-plan investment transactions, market participants name the low probability of obtaining a mortgage, the lack of clear guarantees to investors from the state, as well as a restriction on the issuance of a “golden investor visa”.

Share participation gives the right to receive a “golden” 10-year visa, provided that the readiness of the real estate at the time of the transaction is at least 50%, and the amount of real investment is from AED 2 million.

Real estate in Dubai

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