Dubai’s developers find their comfort levels in ready projects

Dubai: Developers in Dubai have every reason to be cautious with their offplan forays. In the year to end November, offplan sales are down 27 per cent and with limited opportunities in December to narrow the gap with last year.

But these developers are learning to adjust to such sentiments — some of the big names are taking feelers from potential buyers and, where possible, locking in their interest. This way they do not have to make a great deal of marketing noise or spend heavily on promotions. Instead they are dipping into their buyer databases and uploading eye-catching sales brochures of their latest project.

As soon as they get sufficient sales numbers going on these projects via private sales, they can then make the switch to an official launch and all of the accompanying razzmatazz. But for now, it’s working the phone lines and sending those mails using every possibility in their databases.

And for those developers who do not have a new launch coming up? “Keep the marketing and selling costs down and instead focus on using all available funds on the project site,” said one market source. “Until investors start showing up for offplan, the developer’s main selling strategy in 2019 is get to the project into ready status. Ready is where the buyer’s are these days.”

That much is true — sales in the year to end November are running virtually neck-and-neck compared to the same period last year, based on numbers from Reidin-GCP, the consultancy.

But in offplan, just 16,031 units got sold as against 21,913 last year by end November. “A look into transactional activity reveals that the market was fairly balanced between offplan and ready transactions in 2015,” says a new report from GCP. “This changed dramatically by 2017 when the ratio of offplan-to-ready transactions doubled to 2:1.

“In 2018, we have begun to see a reversal of this trend as the ready market has largely began to replicate the incentives being offered in the off plan space. This has occurred against the backdrop of overall transactions having fallen in 2018 as the real estate market has remained sluggish.”

In the ready space, Dubai Marina (1.461 units) and International City (939 units) were sold this year, making them the most popular locations. For offplan choices, it was Business Bay (2,260 units), Jumeirah Village Circle (1,425 units) and the Downtown (1,006 units) by some distance, according to the Reidin-GCP data.

For buyers venturing into emerging locations, there are now more accommodating prices on offer.

A transactional analysis of Emaar’s offplan units reveals that since 2015 the average selling price has slid from Dh2,200 per square foot to Dh1,650,” the GCP report notes. “This fall in average price can be attributed towards Emaar’s entrance into new emerging areas such as Dubai South and the Dubai Hills Estate.

“In 2015, Downtown sales attributed to 71 per cent of transactional volume, whereas in 2018 it is down to 30 per cent. This mirrors the market trends towards affordability.

“Given that per square foot rates have fallen, the fact that (Emaar’s) revenues on an overall basis have increased implies not only a greater push for the number of units in the supply pipeline, but an increasing emphasis on post handover payment plans to maintain developer profitability.”