When looking at the developer results for 2017, there are a few key variables that leap out, both for the equity as well as real estate investor. These variables are likely to play out in the coming year as the market rebalances towards the ready market.

What the results also show is that the torrid pace of off-plan launches will likely slow, as developers have maxed out on post-handover payment schemes. A return to first principles, via an emphasis on margins, imply that two themes will likely unfold over 2018.

One, investment flows will move towards the secondary market and developers with ready stock will benefit from this change in investment destination. And two, despite repeated concerns of “hyper supply” dominating the headlines, developers have shown a remarkable ability In moderating their pipeline of delivered units, adjusting construction schedules to meet the demand curve.

This is likely to continue as the major developers continue to gauge end-user and investor demand. The rise of a few privately-held developers in this cycle has so far not had much impact on the demand curve of the major listed developers.

If anything it has led to a more competitively priced landscape that has benefited the prospective buyer. This implies that developers will realise lower growth rates in profit and revenue in 2018, even as market share concentration levels adjust.

In 2017, the top five developers accounted for more than 75 per cent of sales in Dubai, a level of concentration seen hardly anywhere else in the world. The key factor that could change the dynamics here is if banks get aggressive in lending in the off-plan market.

While there have been advances made in mortgages in this area, there is very little to suggest that the conservative pattern will change in 2018. Unlike the last cycle, where excessive leverage and hyper supply, as well as exogenous events, led to the bursting of the bubble in 2008.

This time around, banks have been cautious in extending leverage. The price action has reflected this, and despite the fall in rents (given the adjustment in the job market from lower oil prices), occupancy rates have remained high in the secondary market, allowing for end users as well as investors to take advantage of prices wherever they have perceived value. Especially as the incentives offered in the off-plan market have reached their theoretical maximum.

In terms of margin segmentation, the listed developers will likely continue to focus on the luxury end, moderating their supply in the mid-income segment and focusing on gentrification as a way of maintaining above industry benchmark margins. Transactional data bear witness to this as emerging areas such as Dubai South, MBR City, Dubailand and JVC experienced significant volume growth.

Private sector developers for the most part came in at the lower end of the price spectrum, allowing for this latency of demand to be absorbed. It is interesting to note that as 2018 has commenced, the aggressive incentives that were offered in the off-plan market are starting to make way to price discounts being offered selectively in the secondary market.

While this may attract some alarm, it is only logical that this is happening, given the wide gap that had opened up between primary and secondary market prices (in some cases by up to 35 per cent or more). These discounts have been the market’s clearing mechanism, a trend that is likely to continue.

On a broader front, the real estate landscape will likely resemble more of a hub and spoke pattern as emerging areas — and even Sharjah and Ras Al Khaimah — attract increasing money flows with developers wanting to maintain their gross and net margins. More likely, private sector developers will move aggressively towards the outskirts of Dubai and into these neighbouring cities to cater to the demand that exists down the price curve.

For listed developers, there have been moves to diversify towards international markets, as well as create recurring streams of revenue. And to spin off divisions through the capital markets as a way of raising capital for their projects. This, along with joint ventures will increasingly become the norm as developers seek to navigate an increasingly competitive landscape.

The writer is Managing Director of Global Capital Partners.