Purchasing Property in Dubai Off Plan

Purchasing Property in Dubai Off Plan 

Prior to 2009 before the market down turn it was common for investors to purchase property in Dubai for the short term in the hope of achieving fast and substantial returns for minimal down payments.

The UAE freehold property market may have been in its infancy but the demand was strong. However there were limited safety measure to protect the investors and unfortunately many suffered when the global crisis hit the UAE and property prices took sharp declines.  Prior to the downturn it was a period of huge capital gains for many investors but it did carry risk in a fledgling market. Most investors were aware of this but few predicted the dramatic fall due to the outside influence in the form of the global financial crisis.

Those investors that intended on selling at a certain stage during the construction period found this near impossible and it was widely published the financial loss incurred due to the delay or cancellation of projects, or the default of the investor due to non-payment of installments.  From this moment off plan properties held little value or security to the investors, as completed properties were providing immediate returns at a lower cost which represented better opportunities to buyers. Of course there was also the security of purchasing a completed property.

At the end of the day too many people were making investments that
hey had no intention, or financial ability to see through to completion.

Post global financial crisis there has been a substantial overhaul of the real estate sector in Dubai designed to protect the interests and rights of both buyer and seller as well as monitor the activities of developers and brokers. A part of this overhaul is that a minimum amount of 40% of the purchase price should be paid before a possible resale is allowable. As a result of these new regulations along with stringent ESCROW law there was a resurgence for off plan property demand.

This was a strategic move to further safe guard the market and acquire investors who were more long term and could see the purchase through to completion. It was designed to cut speculation and keep price rises at reasonable levels, ensure developers received payment from investors, and used those funds correctly. There has indeed been a drop in sales across the board in Dubai recently, not just off plan resale�s.

We feel this is the stabilization period which follows after the recovery of 2013 and should be welcomed for the longevity and future growth. Perhaps the slowdown in sale activity indicates that investors in general are more willing to see their investment through and only those who need to sell are doing so. It is also worthy of note that many payment plans only require 60% prior to completion giving more incentive for investors to hold their properties for the longer term.  All of these factors support a maturing market.

At Exclusive Links we value the importance of historical &
market research and ensure we learn from previous experiences to protect our clients

At Exclusive Links we value the importance of historical & market research and ensure we learn from previous experiences to protect our clients and their investment funds. Knowing the drastic results of previous years it has not been our strategy to provide Buyers with an exit opportunity prior to the completion of the project. We always ensure the buyer is aware they should be able to complete the investment should need be. While opportunities were presented that have allowed investors to sell their off plan purchases we feel this was known to be short term option only and was not sustainable. 

This was further supported in October 2013 when the Government changed the title transfer fees from 2% to 4% to further prevent these short term investors.  Property Investment in Dubai is healthy and accomplished but the market is maturing and with expected stabilization period between 2014 - 2016 short term gain or flipping is not our recommended investment strategy.
 
There is no regulation in Dubai that prevents a Seller from listing their property with multiple agencies and this can contribute to the increase in figures of properties being marketed. Short term investors or those that have purchased off plan within the last 18 months will experience difficulties in selling at this time. They may recruit the help from more and more agencies in the hope to increase exposure however this does not always have the desired result and can negatively impact the market and further deteriorate the final sale price achieved.  Multi agent listings creates a false sense of the quantity of properties available for sale which can influence the statistics reporting the current market climate.

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