DUBAI REAL ESTATE BLOG
Off-plan property resurgence fuels market boom amid rising population
Real estate experts tout lucrative investment strategy as Dubai’s population skyrockets, encouraging residents to buy off-plan as demand for rentals continues to surge but warn of risks
Off-plan is becoming a very popular investment option for many in Dubai.
Real estate experts encourage Dubai residents to invest in off-plan properties as the city’s population continues to grow exponentially, presenting a lucrative investment opportunity that promises substantial returns for those seeking to maximise their investments.
Off-Plan Manager at Dubai-based real estate agency Betterhomes, Kulwant Khurana, told Arabian Business that now is a “great time to invest in off-plan properties,” but they must weigh the risks.
“Dubai’s population growth serves as a crucial catalyst driving the demand for residential properties. The UAE government has implemented various initiatives to foster population growth in Dubai, attracting a steady influx of individuals,” he said.
Properties managed by Betterhomes are currently experiencing record-high occupancy rates in the emirate, reaching 95 percent for freehold properties and 97 percent for leasehold properties, indicating sustained demand for rentals.
Many, in the past, have shied away from purchasing off-plan properties due to concerns about project cancellations, incomplete developments, and challenges in obtaining refunds.
The current global landscape, marked by high-interest rates and rising mortgage rates, has played a role in making buying off-plan a more lucrative investment opportunity. This landscape has affected the viability of purchasing ready properties, Khurana said.
And despite increased rent yields, the costs associated with servicing a mortgage have increased, resulting in diminished net yields after factoring in all expenses, making the economics of investing in ready properties for returns less favourable.
“Off-plan investments offer a distinct advantage by enabling investors to allocate funds towards properties still available at their original prices. The flexibility of payment plans mitigates the impact of high lending rates, ensuring greater adaptability in managing finances.”
“Off-plan properties are more investor friendly owing to benefits such as price appreciation, flexible payment plans, [and] attractive offers from developers,” he told Arabian Business.
“They can be booked at a reasonably lower initial cost compared to buying a completed property.”
Off-plan is becoming a very popular investment option for many in Dubai. In 2022, property sales in this segment experienced phenomenal growth, accounting for 55 percent of overall sales volume and 56 percent of total sales value.
Dubai’s off-plan property market defied the usual mid-year dip trend and recorded over 10,000 transactions last month, according to Property Finder, indicating that it is currently experiencing a boom. Around AED30.41 billion in real estate transactions were recorded last month, marking the highest transaction volume and value for the month of June in a decade. Off-plan properties contributed over 41 percent of the total transaction value.
The top 10 Dubai districts for off-plan buyers last month included: Dubai Marina, Palm Jumeirah, Dubai Harbour, Dubai Creek Harbour, Dubai Hills, Burj Khalifa, Jumeirah Lake Towers, Jumeirah Village Circle, Umm Suqeim Third and Dubai Design District.
With flexible payment plans, relatively lower prices, the promise of higher returns, and the opportunity to customise the property to your liking, the off-plan property market in Dubai has garnered enduring favour among residents and investors alike. But potential buyers need to do their research before committing to such an investment.
“Buying off-plan allows you to purchase a property at a lower price compared to completed units and as Dubai continues to develop and expand, there is potential for the value of off-plan properties to appreciate by the time of completion,” said Khurana.
“However, it’s important to research the location, demand, and market trends to assess the potential for capital appreciation.”
Simon Quinton, Off-plan Manager, Residential Brokerage, at Colliers in the Middle East told Arabian Business that off-plan is “an excellent option” for expats in Dubai.
“Many expats recognise the areas of development within the region and can readily identify the emerging growth areas that align with the UAE government’s plans and proposals, such as the Dubai 2040 Urban Master Plan, which offer fantastic off-plan investment opportunities,” Quinton said.
He added that many of the new developments and communities being introduced in the emirate “align closely with the elevated expectations” of potential clients in terms of quality and services.
“They outshine many of the current offerings in both older properties [and] communities, and enable the clients to take advantage of better build quality, and modern designs and finished, along with some fantastic payment options and returns on investments.”
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