Dubai: Bargain-hunting investors are starting to pick and choose their way through Dubai’s portfolio of completed properties, and thus ensuring the last few weeks of the year close with higher transaction levels than has been the case in the past three quarters.
For instance, these investors have homed in on the Garden Homes at the Palm Jumeirah, which at their peak were commanding Dh20 million and now available at a relatively more accessible pricing — at around half of that amount — in the secondary market. according tosources. “There’s a bit of activity now centred around the pricey Jumeirah Islands’ properties, and even down the value chain where a two-bedroom Springs villa is now on offer at around Dh1.4 million against Dh2.3 million earlier,” said Sameer Lakhani, Managing Director at Global Capital Partners, an investment firm. “Clearly, there are cash-ready investors who want to pick up realty assets in Dubai now rather than wait in expectation of a further decline.”
But, these buyers are extremely selective in what they want. Buying off-plan and waiting three years or more for delivery does not figure high on the wishlist. But secondary market transactions for ready properties in perennially high-demand locations such as the Palm is what interests them. And if they get a bargain in the process, all the better.
“You do have fairly generous discounts on offer on off-plan as well, extending by up to 20 per cent on the launch prices,” said Lakhani. “These are available directly from developers — provided the buyer is willing to make higher down payments — and even through the secondary market, where the existing buyer is looking to make a quick exit.”
“Compared to the third quarter of 2014, the third quarter of 2015 showed an uptick of activity signalling that a period of stabilisation may be on the horizon.”
Apart from properties, plots too are coveted by these buyers. JLL on Tuesday issued an industry update, which suggests that more investors are making the switch from buying property to picking up plots in Dubai, based on the Land Department data for the first nine months. More of the same could be witnessed when the numbers for the fourth quarter of 2015 are released early next year.
“It may not be such a coincidence that master-developers in Dubai are releasing a higher supply of plots into the market now,” said Lakhani. “There are villa plots available in the Safa Park area from Meraas, and around 200 plots for a labour camp in Jebel Ali. The pricing looks reasonable for a long-term value investor with the Safa plots at around Dh625 a square foot and the labour camp plots at the Dh200 mark on average.
“Even at some of the most prestigious emerging locations, such as MBR (Mohammad Bin Rashid) City, land can be snapped up at between Dh350-Dh420 a square foot. Clearly, developers are changing their strategies to accommodate the changing investor preferences. For investors holding land assets seems to be a better hedge against the ongoing correction in property pricing.”
Within the established freehold locations, transactional activity has dipped between 30 to 46 per cent in the first nine months of this year as compared to what they were in 2013. But if a more direct link were drawn between the third quarter of 2014 and the third quarter of 2015, some of Dubai’s communities were able to record transaction gains of 8 per cent, according to GCP data.
As 2016 approaches, the biggest question — and as yet an unanswered one — is how much further property values could drop in Dubai. Or whether prices have already dropped as much as is likely, at least in some of the key locations.
If investors are able to gain clarity on these, they should be more than willing to shed their inhibitions.
Even discounts come with ‘accelerated’ plans
Discounts may be coming thick and fast in Dubai’s real estate market, but there is nothing that can quite match the scope of an ‘accelerated payment plan’.
In this, an investor with ample funds in hand could make a higher down payment on the asset and then use that leverage to get try and wangle a bigger discount from the developer. And these discounts tend to be quite substantial, more so for off-plan projects or plot purchases.
Even in the secondary market the accelerated process works. An investor could pick up an asset from the current owner and then negotiate a more favourable discount deal with the developer. Again, he would use a higher upfront payment as the bait.
“With cash-ready buyers, there are always ways where a deal can be a win-win for both the developer and investor,” said the head of commercial sales at a leading real estate developer in Dubai. “It has worked extremely well for us with our extremely high-end villas sales. These are all indicators of the funding and transaction options available in a maturing marketplace.”