Stock Dubai Skyline Marina
Apartment values in some locations have dropped by 30% plus in the last six years. Image Credit: Virendra Saklani/Gulf News

Dubai: With the cost of buying a home in Dubai at a five-year low, buyers are more likely to pick up a ready property than wait around two or more years for an offplan unit to be delivered.

This preference among buyers is showing up in the numbers – there was a 7 per cent increase in home purchases made in the secondary market during 2020, while offplan sales were down 32 per cent. This is despite developers backing their offplan sales with three- to five-year payment plans (even longer in increasing number of instances), a freeze on service charges, and the usual waiver of registration fees at the Land Department. Some developers are going that extra mile by doing away with even the down payment.

Even with these efforts by developers, it’s the time for ready homes and the secondary market. Many are doing so convinced they will get a better bargain from an investor wanting to offload in the secondary market than from a developer. The sale price and ready handover are what matters these days…

“After the initial slump in transaction activity in April and May 2020 due to movement restrictions, secondary market monthly volumes have steadily risen since June, with December witnessing the highest monthly volumes in two years,” says the new report from Core, the property consultancy. “We expect this momentum to continue over Q1-2021 as the market is proving to have a sustained demand for secondary market units driven by end-user demand.”

Dubai Property Market 1
The Dubai locations and their handovers... More supply will ensure values remain in check. Image Credit: Core

Best bargain spots

If your preference is for an apartment, check out some of the secondary market buying options at JLT (Jumeirah Lake Towers), where values are now down more than 40 per cent from their mid-2014 peak. A one-bedroom unit is being advertised from Dh650,000 onwards. If your budget is lower, head over to Discovery Gardens, where units now have asking prices from Dh400,000.

Dubai Property Market 1
Dubai's developers are cutting down on their offplan launches and focussing on handovers. Over the next two to three years, this is their best way to connect with buyers. Image Credit: Core

Lower down payments

It was in March last that the UAE revised its lending guidelines for first-time homebuyers, under which expats could take up to 80 per cent of the property value as mortgages. It used to be 75 per cent earlier. Upcoming data from the Central Bank will provide some insight into whether this move paid off and whether banks have indeed turned more generous with their home lending portfolios.

Highest new-home delivery points
Mohammad Bin Rashid (MBR) City and Dubai Creek Harbour will likely see the highest number of deliveries in 2021

Prices won’t be going up… soon

In 2020, Core reckons around 36,000 new homes were delivered in Dubailand, with the Town Square (where a one-bedroom is quoting at Dh500,000 plus), Mudon (where three-bedroom townhouses are from Dh1.4 million), and Damac’s Akoya Oxygen seeing the highest number of handovers.

“With many major developers to curb supply, we expect a slowdown in 2021 handovers with nominal new project launches,” the report adds. “We conservatively forecast nearly 39,000 units for 2021; however, further revisions are expected on supply forecasts as they will inherently depend on buyer confidence and an uptick in market sentiment as developers continue to adjust to ongoing market conditions.”

Even if eventual 2021 handovers come in at the 25,000-30,000 mark, that’s still quite a bit for the market to absorb. In other words, chances of a sudden price increase are remote. This too should help buyers – and sellers – in the secondary market. And potentially add to the worries of developers wanting to offload their offplan units.

Dubai Property Market 1
What's coming and where... The level of upcoming supply will have the most telling impact on property values and demand. Image Credit: Core

They could even drop

Some industry watchers predict a further decline in Dubai property prices, of around 8-10 per cent, this year. “At the first signs of job stability in the wider economy, more end-users could enter the property market,” said the head of a brokerage firm. “There are more 30-year old residents wanting to make their first home purchase in Dubai than back in their home country.

“Developers should not miss this opportunity to widen their user base. They cannot keep hoping to sell off their newly built homes to overseas investors.”