Dubai: Dubai’s property developers have no intention to go slack on new launches … at least not yet for sure. In fact, all through the last 12 weeks — when overall transaction levels in the market had tailed off quite sharply — there was a steady trickle of new off-plan offerings.
Developers believe that a competitively priced off-plan property can entice buyers and at the expense of ready units — albeit available at higher price — in the secondary market.
“The general slowdown could have been a deterrent, but we felt there are still end-users out there willing to commit right now for specific property types,” said Dinesh Jain, Partner at Artistic Property Development which launched its first venture — a cluster of 12 G+2 town houses in Jumeirah Village Circle — last week. “That being the case, it was decided to go ahead with the sales launch rather than wait until more favourable market conditions emerge.”
Others are following the same script — Reef launched a residential high-rise in Jumeirah Village, Danube Properties launched its second project through the “Glitz”, while further releases keep taking place for apartments in the strictly upscale Dubai Creek Harbour locality. Union Properties is aiming for a repeat performance with the launch of the third phase — featuring 220 units — at its enduringly popular Green Community master-development.
With more developers expected to sign off on new launches, the first half of this year looks set to be quite a busy one. The big question then would be, whether there are enough buyers out there to make all this effort on the developers’ part worthwhile.
“Most of the projects launched recently have reportedly been “sold-out” … Many tenants are turning into owners, seeking mortgages in line with their income,” said Matthew White, Director of Sales and Leasing at Chestertons Mena, the consultancy.
Also, developers of the recent round of off-plan launches have been playing it smart. “Recent launches have absorbed excess liquidity from the ready properties market,” said White. “Off-plan prices continue to be competitive at 15-20 per cent lower than prevailing market prices.
“This has slowed transactions in the ready property market as cash buyers divert funds towards off-plan market. Capital appreciation is a key motivation behind off-plan property investments as buyers also considering properties that offer a unique positioning in comparison with other units.
“Therefore, the core marketing message behind the project is becoming critical.”
There are many instances of that already — with Danube, the marketing hook is the “1 per cent” monthly instalment, while for Union Properties it is by presenting an opportunity for investors to get into one of Dubai’s original residential “communities”, with prices hovering at around Dh1,000 a square foot.
“Many developers have understood this [there is a slowing down] and working to redesign their products to match demand requirement,” said White. “Developers are getting into modifications or adding unique features.
“They are [also] seriously relooking at the price — many developers are conducting extensive research to arrive at an accurate pricing.”
Longer sales cycles
But at some point, subdued market sentiments that have led to a drop in market transactions since the second half of 2014 should leave their mark on off-plan releases. If that happens, would that mean developers have to resign themselves to longer sales cycles on their new projects?
“I don’t think sales cycles have increased [though] more and more developers are struggling to sell stock,” said Thomas Bunker, Manager — Better Homes’ Real Estate Offplan Sales Division. “There appears to be a push to recruit more and more agents to market available property.
“Developers are trying to find new ways to entice buyers by way of better show properties, easier payment plans, end-user financing, sales price discounts and — in some cases — free cars.
“Selling off plan is more challenging than it has been in the past and developers need to work harder these days to close deals.”
According to Bunker, developers should stay away from a one-size-fits-all game plan. “If a developer is building a small project like a G+4 or G+6, my advice would be to hold off on selling individual units within the building until project completion and then market the entire building for sale,” he added.
“There are a number of potential buyers out there looking for new, completed lower-rise buildings in their entirety — to be used for company staff, to be rented out or to property manage. And there is a scarcity of these buildings out there in Dubai.
“If the developer is building a large tower, this is not so easy and cash flow becomes an issue, and they may have no choice but to pre-sell.”
Whatever be the pace of sales transactions, Dubai’s property market and its stakeholders need not worry about one thing — the city looks set to add another 100,000-120,000 newcomers to its existing resident base. All those properties they are adding will come in handy at some point or the other.
