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Big demand surge fuels Dubai's off-plan market

Off-plan property market has experienced a remarkable 35% surge in demand over the past three months

Published: Mon 9 Oct 2023, 6:24 PM

By
Issac John

Workers are seen at a construction site in Dubai. - AFP file

The outlook for Dubai's off-plan market is promising, having witnessed a notable surge in interest from investors and end-users, property market consultants said.

With a 40 per cent to 60 per cent increase in the number of foreign and local property buyers, the off-plan market is booming, indicating a favourable environment for real estate investment in the emirate.

“Currently, the overall landscape suggests a positive trajectory for the off-plan market in the emirate. However, it's important to note that various factors can influence the real estate market, and trends may shift over time,” analysts at Betterhomes wrote.

They said the off-plan property market has experienced a remarkable 35 per cent surge in demand over the past three months compared to the corresponding period last year. In addition, off-plan transactions now account for a significant 61 percent share of Dubai's overall real estate market,” analysts said.

Dubai recorded off-plan transactions worth Dh34 billion during the second quarter of the year, up by 750 per cent from the Dh4 billion deals registered in the same period in 2020. “That’s an increase of around Dh30 billion in transactions over the course of three years,” Zazen Properties said in a report.

According to a recent report by Property Monitor, off-plan sales took the highest market share as of August this year. Off-plan sales now represent 64.7 per cent of the market. The total volume of sales transactions went up by 8.1 per cent month-on-month, reaching a total of 12,134 sales and marking the highest volume ever for the month of August.

Property market experts believe that in this current market, it is a great time to invest in off-plan properties for several reasons. “First, the current landscape of rising mortgage rates has altered the viability of purchasing ready properties for investment purposes. Despite increased rental yields, the costs associated with servicing a mortgage have surged, resulting in diminished net yields after factoring in all expenses,” they said.

“Consequently, the economics of investing in ready properties for returns have become less favourable. Second, off-plan investments offer a distinct advantage by enabling investors to allocate funds toward 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. Third, Dubai's population growth serves as a crucial catalyst driving the demand for residential properties.”

Betterhomes’ report said with Dubai's ongoing development and the steady rise in population, off-plan properties hold significant potential for appreciation in value by the time they are completed. “Buying off-plan properties allows investors to purchase a property at a lower price

compared to completed units. In addition, off-plan properties typically offer flexible payment plans, which can be advantageous for investors,” said the report.