Dubai property market’s buying and selling dynamics are changing

With more than 1,000 real estate projects under construction in Dubai and thousands of new homes getting delivered this year, the market growth remains a strong draw for investors. However, it's crucial to manage risks.

While the current market strength presents significant potential for high returns, it demands a cautious approach. Investors must recognize that pursuit of lucrative yields can take time and develop a clear strategy.

If you’re investing in real estate, be ready to meet all payment obligations until project completion. When an earlier profitable exit opportunity arises, it’s a great bonus. Investing without the ability to fulfil future payments is comparable to gambling.

A major hazard in reselling during the construction phase is competition from developers themselves, as they continue to launch new, more attractive projects, making it difficult for investors to resell offplan properties in the short-term. This is fair. Investors should not expect to buy today and resell within three months for a profit.

Difficulties in reselling

The current cycle differs from previous periods, particularly 2018-22 when developers drove prices up based on rising material costs, logistics, inflation, and Dubai’s recovery to a stronger global position.

This surge created ample opportunities for reselling property before completion, with returns on equity of up to 400% in some projects. However, developers have moved away from post-handover payment plans, which were common before COVID-19. These made reselling easier, as new buyers found them more attractive compared to new launches with more aggressive payment terms.

Despite the market’s current competitiveness and the influx of new projects, some developers are offering more favourable deals. These new releases make it challenging for owners of under-construction properties to resell, but also present opportunities to new buyers.

New offplan projects often feature attractive payment plans and low initial capital requirements, which are particularly appealing. Once these projects reach the resale market, however, buyers will need significantly more upfront capital, likely causing a shift in investor focus.

Watch out for Jebel Ali opportunities

We can expect to see a growing attention on unique prime locations and distinctive projects that offer strong market positioning. I see a rising interest in Jebel Ali, which remains under-priced and yet virtually guarantees market capital gains over time.

Investors today have access to very transparent data on market transactions, supply and demand. This increased transparency empowers them to make better decisions. As the market continues to mature, AI will play a growing role, just as it continues to impact the way we live, and work, in many other ways.

But the current trend to trust AI alone to identify the most profitable opportunities is fundamentally flawed, at least for now. There is currently not enough data for AI to run sufficient assumptions and simulations. As a result, the tech is capable of delivering some very unexpected - and unpleasant - surprises.

Dubai's offplan market, nonetheless, offers a very promising investment landscape, and there are some basic guidelines to follow in order to minimise risk, and enjoy the best returns.