Some developers have really exhausted the reputation of Dubai as an international real estate and business hub - by continuing to supply the market with offplan projects that are priced an average 20 per cent higher than more or less the same properties offered on the secondary market by individual investors.
They had done so during 2018 and 2019 as well. The question then is: Why and how they did manage to sell at an average of 20 per cent higher than the resale market? They capitalized on the following aspects:
* Targeting mainly inexperienced first-time investors from overseas.
* Targeting investors who believe in the myth, “If you buy offplan you can sell on handover for a higher price”.
* Heavily incentivizing agents with high commissions and bonuses, of which, some developers could not even honor at the end of the year.
* Lastly, heavy marketing.
Needless to say, as time passes more and more investors realized, mostly after they invested, that developers are selling a rate higher than the real market. The word started to spread and so did the feeling the pain of losing money soon after they committed their investment.
Nevertheless, investors are also to blame for not having done the A, B, C of due diligence. The Dubai real estate market became very transparent following The Open Source Data initiative and with Dubai Land Department investing a lot of effort to educate investors and spread awareness. So, the data is available and provided by the Land Department on an open source basis.
But interpreting this data is crucial... and investors must stay away from biased market reports. With Dubai aiming to be the most innovative city by 2021, it aims to create a platform to bring innovation and technology to the realty sector, and making it easier for all players in the market to make well-informed decisions and eventually lead to a better market.
I am a big believer in the Dubai market - the massive success of the city is based on its continued drive and speed of growth. I believe the Expo 2020 will definitely be a tipping point for the real estate market in Dubai, simply because Dubai has a Wow factor. And the Expo is the global stage that will expose Dubai to many other investors who would find Dubai a great place to invest and live.
- Firas Al Msaddi is CEO of fam Properties.