Citysape Global
Workers giving the final touches to exhibitor’s stalls on the eve of Citysape Global at Dubai World Trade Centre on Tuesday.. Image Credit: Virendra Saklani/Gulf News

Dubai: Off-plan property launches in Dubai have dropped to their lowest level in five years — but don’t worry, there are always ready homes to choose from. Estimates suggest that just under 17,000 new homes were completed in the year-to-date, and 2019 could close with the final tally reaching about 25,000 units, according to data from Reidin-GCP.

A number of these are still awaiting buyers, with their developers just as keen to offer sales incentives as they did at the off-plan stage. There are other options too for buyers — they could pick up a home in the secondary market where prices are now even more in sync with what they are willing to pay.

“Yes, there are still better bargains to be had in the ready space than in off-plan,” said Sameer Lakhani, Managing Director at Global Capital Partners. “Despite some reduction in the gap, off-plan launch prices are still higher over ready/secondary market prices, and that will always be the key with a certain type of buyer.

“It’s because of the post-handover payment plans and the other incentives — such as free registration and waiver of service charges — that off-plan launch prices remain high. For now, the direct discounts are mostly taking place on ready units.”

A low year for off-plan launches

In the first nine months, just over 6,000 units were released as off-plan in Dubai. Now, launches by three of Dubai’s leading government-owned/associated developers accounted for the bulk of them, leaving little room for private developers. It is unlikely that this could change dramatically in the final three months of the year.

Compare that with the launch volumes of the last two years, when they tallied 21,821 units in 2018 and a staggering 51,367 in 2017; the year 2016 was just as good with 43,575.

Clearly, the message seems to have gotten through to private developers that they are better off completing the ones they have rather than take needless risks in the current market. Just about every other private developer is talking about shelving plans until they see clear signals of a turnaround.

They will also need to account for stricter guidelines from Rera (Real Estate Regulatory Agency), whose remit has just been repurposed. Now, the government agency will directly oversee the demand-and-supply pipeline in the freehold property market, while it shed the earlier role of also overseeing the rental space.

“The lower rate of launches this year is not surprising given the speed with which developers resorted to post-handover payment plans, which was first introduced in 2016 to clear their inventory,” said Lakhani. “Despite the subdued pace, transactions are still up on a year-over-year basis (5.5 per cent up for ready and 28 per cent for off-plan). This suggests there is increased appetite for real estate assets at current levels, especially where payment plans are being offered.”

Stretched to 20 years

MAG Development recently brought out a plan that would extend the payment period to 20 years, a timeline that was only seen in mortgages offered by banks. The company is offering the scheme to buyers across multiple ongoing projects, including the community it is building at Meydan. (MAG is using the “Dh120 a day” gets a home message to push this campaign.)

Will other developers — privately owned players — be able to match MAG? There are one or two that have gone past 10- and even touched 15 years; but 20 years will be difficult for any developer who is not reasonably sure of his cash flow and other funding requirements.

“More than ever before, developers will need to look at alternate funding options,” said Samir Munshi, Managing Director at Silver Heights. “They cannot keep on relying on banks for all of it. And post-handover plans mean they have less cash to call on during construction.

“This is where investors can help out developers complete their projects. Despite the decline in rents in the last two-three years, yields are still high. In the mid-segment, this could be between 7-9 per cent against the rate on borrowing of 3-3.5 per cent.

“That’s why investors are willing to come in ... now. They reckon values have hit the bottom.”

A year when each dirham counts

Cityscape Global 2000 opens in Dubai on Wednesday, but some of the biggest names in the business of real estate development will not be there. Emaar isn’t, but Dubai Holding too is sitting out this edition. MAG, which through the years has been a rock solid presence at Cityscape Dubai, is also spending this year on the sidelines. Danube Properties too will not be there.

“Where possible, developers are intent on cost control,” said an industry source. “This year, it’s also a reflection on the state of the market, and developers may feel there are less expensive ways to reach their buyers than spend three days at a trade event.”

Selective gains

After two years of price dips, and more of them, the last two months have provided selective gains for Dubai’s property market. Yes, it’s not across the board, but locations such as the Palm, Springs and Meadows, Arabian Ranches, and JVC (Jumeirah Village Circle) seem to be gaining a lot more investor attention these days.

Let’s look at the average prices — in August, sales transactions at the Palm were averaging Dh1,594 a square foot against July’s Dh1,497. And these are a distinct improvement over what it was in January of 2018, when the average was Dh1,568.

At Arabian Ranches, there is a slight improvement in August, at Dh923, against July’s Dh917. But to match January 2018’s Dh1,086, there’s still some work to be done there, according to Reidin-GCP data.