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Dubai: Buying ready-to-move-in properties is not so common, but gaining currency

Trust factor has improved immensely in the local property market

Buying ready-to-move-in properties directly from the developer is not a common trend right now due to the high premium buyers have to pay as well as low return on capital when compared to off-plan properties.

Therefore, off-plan properties are still the preferred choices of residents and buyers due to better returns as well as smaller mortgage payments for the upcoming properties.

However, the ice is breaking with developers slowly and steadily entering into the ready-to-move-in property market to cash in on demand from residents and investors who like to park their money in ready properties or looking to move into such units to avoid paying rentals.

Importantly, the trust factor has improved immensely in the local property market with the introduction of measures related to regulations and residencies taken by the government over the past decade, therefore, demand for new ready properties market will also grow in the coming years.

Dubai’s leading private developer Danube Properties recently launched its first ready-to-move-in project Eleganz with its popular one per cent one per cent payment plan. Similarly, Dubai’s largest private developer Damac Properties also aggressively promotes ready-to-move units.

“Eleganz by Danube is the first ready-to-move-in property introduced in the market. We launched because when we were selling off-plan properties, a lot of people inquired about ready units. All of our off-plan projects were immediately sold out, so we had nothing to offer to our customers any ready-to-move-in properties. Therefore, we introduced this and buyers can move in with a payment of just 40 per cent and the balance is one per cent per moment,” said Rizwan Sajan, chairman of Danube Properties.

Sajan said they will definitely launch more ready-to-move-in units in the wake of the strong response of Eleganz.

Alina Adamco, head of sales at Metropolitan Homes, says acquiring ready-to-move-in properties directly from a developer is not a common trend now as developers mostly sell out their projects shortly after announcing the launch and sometimes even during the pre-launch stage.

According to Metropolitan Homes, 32,645 units have been delivered to the market this year, compared to 34,667 in 2022, which is a slight drop of almost 6 per cent. However, many more units will come onto the market this year than in previous years. This year 72,991 units were launched in the market, an increase of 26 per cent compared to 2022 and an increase of 174 per cent from 2021.

In October 2023, Jumeirah Village Circle (JVC) was by far the most popular location for residential apartment sales with a total of 339 transactions. According to Property Monitor, Business Bay and International City recorded the second and third-highest number of transactions respectively. For residential villas and townhouses, Al Furjan and Mohammed Bin Rashid City have proved the top locations for ready property sales in October followed by JVC.

Imran Farooq, CEO, Samana Developers, says demand for ready properties is still rising and is higher as compared to the previous year.

However, the development sale is very strong and ready to move in stock offered by developers – either they are new or old – is rare as they have high off-plan stocks.

“The overall year-on-year demand has increased by 20 per cent as the rental demand is very strong... Most developers are witnessing sales growth of 200-300 per cent due to improved market conditions and extraordinary demand in Dubai, says Farooq, saying they remained focused on off-plan because investors expect new design concepts with a host of new amenities, quality assets, finishes, luxurious yet affordable properties. “We do not have ready stock left.”

Off-plan or ready property?

Buying off-plan has several advantages. New developments have a very high finish as market trends have changed in the last three years due to the influx of European and Russian buyers.

In competition, several developers have started offering better amenities in new projects. Old projects have basic amenities, which is not attractive for long-term buyers.

“The key benefit for buyers going for an off-plan unit is the flexible payment plan, which brings the prices within reach and easy to mortgage. It is kind of getting pre-approval of easy instalment without going through credit cheques and long paper works,” says Farooq.

Sajan said if residents or buyers have immediate requirements, then they should definitely go for ready-to-move-in properties. But if they can wait for 3-4 years, properties being developed with the amenities would be much more advanced. “So it is a choice of the customer.”

Adamco adds that buyers of ready-to-move-in properties are primarily looking for assets that can be immediately occupied by their families or rented out to generate a healthy return on investment of six to eight per cent.

“Additionally, ready-to-move-in properties can be a compelling factor in obtaining an investor or golden visa. These ready properties can also be mortgaged or refinanced, allowing owners to access additional funds for reinvestment in other attractive properties.”

High premium

The Samana chief stated that ready-to-move-in stock with great finishes is difficult to find and commands a heavy premium.

“The additional premium rate is not fixed. It relies on different factors such as the type of area or community, amenities, and per-square-foot prices. Old-style developers or very old buildings with average and old-style designs and finishes may have a high cancellation rate. And they may have some options on the market. Generally, these kind of properties struggle,” he added.

Adamco of Metropolitan Homes stated that the premium that buyers need to pay for ready units depends on the project, its location, the developer and the availability of units.

The developer’s availability can create direct competition with resale options, especially given that obtaining a No-Objection Certificate for resale usually requires an upfront payment of 30-40 per cent from the existing owner or the buyer.

“This is a measure of protection against ‘property flipping,’ which in the past allowed speculative resales with heavy premiums on properties purchased with a 10-20 per cent down payment. The Dubai Land Department’s fee increase from 2 to 4 per cent in 2013 was also aimed at curbing this practice and to cool off the speculative resale market.

“Nowadays, investors who are buying properties from developers and planning to resell them are patiently holding their assets for at least one year from the date of the project launch to gain better premiums. The most strategic ones are reselling during or after receiving the property handover to gain access to both cash and mortgage buyers and a larger sum of profits,” said Adamco.

Citing an example, she said the owners of properties in Emaar Beachfront are seeing premiums of up to 120 per cent versus the original purchase price paid to the developer 2-3 years ago.

At the same time, clients who bought properties in Emaar Beachfront in June 2023 can resell now with a 15-20 per cent premium.

"In DIFC Living, the resale value is now at approximately 15 per cent versus the original price. Of course, not all projects are alike, and considering all the external factors, an average of 15 per cent premium per annum is a safe bet,” she added.