Mortgage rates are still high - but developers in Dubai are aggressively tweaking payment plans to make it easier for a tenant to turn into a homeowner. And with options of Dh1 million and under homes. Image Credit: Shutterstock

Dubai: Dubai property market is seeing a wave of offplan properties with Dh1 million or under price tags as developers try to convince more residents to turn themselves into end-user buyers.

This heavy push also coincides with the recent updating of the Dubai RERA Rental Index, which allows landlords to raise rentals up to 20 per cent when the next lease renewal comes up.

Recent sales releases at Motor City (starting Dh990,000), Nshama’s Town Square (from Dh770,000), in Jumeirah Village Circle and elsewhere will give prospective resident-buyers options to get into the Dubai housing market on their own rather than remain as tenants. Market sources say there is still a vast pool of such end-user buyers who are waiting for mortgage rates to come off their highs (at 4.5 per cent and up) or waiting for a property to come to market with an affordable price tag.

Tipping point to turn from tenant to buyer

They add that developers had been focusing on the ‘Golden Visa’ purchases, of Dh2 million and upwards as the best way to get demand for their projects. But now, they see possibilities to turn tenants into homeowners with price tags of Dh1 million to Dh1.5 million.

Whatever be the case, offplan sales in Dubai continue to put in more growth, as developers keep pushing low down payment and stretched post-handover payment schemes, according to a new report from Reidin-GCP. If not that, then the 1 per cent monthly payment is the other option that potential end-users are being offered.

“Jumeirah Village Circle and Sobha Hartland are two communities where offplan activity has been greatly concentrated,” says the report. “These are also two communities where there have been an easing in payment plans and leading to increasing offplan sales.”

Average residential prices in JVC (on ready and offplan properties alike) is around Dh900 per square foot, while at Sobha Hartland, it is Dh1,275-Dh1,300. “Offplan sales in Dubai have dominated because of post-handover payment plans with a strong correlation,” the Reidin-GCP report adds. “Two such communities where it’s higher than city-wide average is JVC and Hartland - but it’s not limited to them.”

Notably, across Dubai’s residential property sales, offplan purchases are higher by nearly 30 per cent on a monthly basis.

Locations in Dubai with the highest offplan sales Image Credit: Reidin-GCP

Will end-users buy now or wait?

As Dubai residential rents increase, that more residents in the mid-income salaried category will actively seek buying options is a given. Particularly those in 30 year and over demographic and with long term plans to be residents in the country.

What has been holding them back until now is their waiting to see when US interest rates cuts happen and how banks here reduce their mortgage rates in tandem. A significant number of potential buyers rate mortgage rates and their EMIs as a prime concern.

Over the past four years, the Dubai residential sales market has shifted away from ready properties, with a majority of sales now taking place in the offplan space. In 2020, offplan only accounted for 46.3% of the total city-wide residential sales volume. In 2023, that figure had risen to 58.8%

- Reidin-GCP report

Some buyers have also been waiting for property prices to cool off. Based on the first quarter 2024 data, there is a slowing down in property value growth in Dubai’s freehold areas – but not any significant decline in values. And certainly not in mid- to upper-mid locations such as JVC, Furjan, and others.

If developers fine-tune their marketing pitches to these buyers, they can be convinced to switch from tenant to homeowner status. This is where the down-payment and payment plans will help.

Already, the market is seeing 5-10 per cent becoming the norm as down payment on mid-market property sales. (Some developers are also testing demand with 1 per cent down, but that’s still the rarity.)

The main driver will be how they can get the pricing right – and this is where the Dh1 million to Dh1.5 million tags can help. Of course, anything under Dh1 million too…