Lower priced products, attractive payment plans and good yields drive up off-plan sales
Dubai has witnessed an uptick in both ready and off-plan transactions annually in the first 10 months of 2017. Approximately 9,183 ready properties were sold from January to October 2016, as compared to 9,623 units in the comparable period in 2017, a marginal increase of five per cent. However, off-plan sales recorded a staggering annual increase of 65 per cent, with 18,000 units being sold so far this year as opposed to 10,939 units in the comparable period last year, according to GCP-Reidin data.
The standout performers in the off-plan category were Dubai World Central (annual sales growth of 880 per cent), Dubai Hills Estate (628 per cent), Jumeirah Village Circle (152 per cent) and Dubai Creek Harbour (88 per cent), says Reidin data.
"One of the biggest changes that we have seen this year in the off-plan market is extremely attractive payment plans, coupled with offers of DLD fee waivers. There is also the absence of an agent's fee to pay in nearly every case. It's not only investors buying off-plan, there are a lot of end-users too. If a buyer is renting at the moment and looking to purchase, the payment plans and fee reductions can make cash flow a lot easier and they are happy to wait for the development to hand over," says Lewis Allsopp, CEO, Allsopp & Allsopp.
The area where off-plan sales have risen the most is Dubai South, where there are no such generous payment plans being offered. This suggests that there is latent demand in areas even when such payment plans are not offered as well.
"There has been a genuine rise in demand in many areas [undoubtedly payment plans have played a part, and arguably in some cases have even gone overboard]; however, the data suggests that in emerging communities, the demand has been there because of other factors as well [price, future location and desirability of community, either current or future]," says Hussain Alladin, head of IR and research at Global Capital Partners.
According to David Godchaux, CEO of Core Savills: "DWC saw very attractively positioned lower entry products launched in phases such as The Pulse and Towers by MAG, etc. JVC saw the phases of Belgravia as one of the best-performing developments, elevating both the area and transaction average. Creek Harbour is both an investor and end-user product with good payment plans, backed by the developer's reputation and the flagship project anchoring the new district."
Meanwhile, in the ready apartments market, Discovery Gardens saw the biggest increase in transactions at 42 per cent.
"Discovery Gardens is in an excellent location with improving transport links and relatively close to the Expo 2020 site. It remains a popular area to live and it offers a fantastic return on investment. It's not a huge surprise to see it doing well," observes Allsopp.
However, Core Savills attributes the spike in transaction activity in Discovery Gardens to a few bulk deals concluded this year.
Communities such as International City, International Media Production Zone (IMPZ) and The Greens have recorded a fall in the number of ready units sold so far in 2017.
"Both IMPZ and International City provided one of the lowest entry points for sales in Dubai two to three years ago. In the last 12 to 18 months, there are many more outer areas offering a variety of products which have spread the demand across, thereby affecting transaction volumes of older areas. IMPZ has seen a shift of its demand to newer and sometimes more attractive units at similar entry points in JVC and JVT while International City witnesses increasing competition from products in Dubailand," explains Godchaux.
A fall in transactional activity could also be construed as a positive sign, indicating that there are less units available for sale in the market.
According to the Reidin
data, there were fewer transactions for ready villas in Arabian Ranches (-6 per cent), Jumeirah Park (-22 per cent) and the Palm Jumeirah (-25 per cent).
"The villa space was considered relatively overvalued and to that extent, a drop in investor activity was going to be more pronounced, especially given the fact that the upper and luxury end of the market has suffered the brunt of the decline in this market cycle, both in terms of price as well as rent," says Alladin.
Renovated or newly delivered villas on the Palm Jumeirah have seen good demand since many older units require higher renovation costs. Many other prime and new villa districts offer quality options such as Emirates Hills, Dubai Hills Estate, Jumeirah Golf Estates - these help spread demand.
"Ready villas have been largely an end-user driven product as families prefer staying in villas while investors are less attracted due to lower yields. End-user demand in general has been flat over the last 12 to 18 months as the sentiment of uncertainty persists, in contrast to stronger investor demand driven by low-priced products, attractive payment plans and high yields," maintains Godchaux.
The nominal drop of six per cent in Arabian Ranches is potentially due to its newer phases (off-plan) and Mira absorbing some demand.
Core Savills estimates that Jumeirah Park villas have seen over 12 per cent drops in the last two years (20 per cent from the peak), one of the highest in the villa market. "Landlords in these areas do not wish to exit the market at negative premiums while rent levels are still able to sustain yields and mortgage payments, making sense for owners to hold on to property, meaning lower activity levels in the market," concludes Godchaux.
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