Sell now or wait until a better price comes along? This is a dilemma that many investors have in the present market. With many new properties offering a myriad of amenities, several sellers of properties “in secondary communities have had to reduce their prices to pique investor interest,” according to Sean McCauley, CEO of Devmark. It’s a buyer’s market, and that is generally not good news for potential sellers.
Underlining the pressure on prices, the first quarter ValuStrat Price Index (VPI) for residential properties was down 12.4 per cent annually in capital values, with quarterly declines of 3.2 per cent. “This downward trend resulted in 27.1 per cent citywide capital value loss since the peaks of mid-2014,” the report said.
McCauley notes though that the volume and value of off-plan sales had been relatively buoyant in recent months. Much of those performing well in the market have been able to focus on delivering value in other areas, such as location, property configuration and payment plans.
“Also, with the launching of new master-plan communities that are slightly further out than the more established and centrally located communities in Dubai, the property developers have managed to offer similar accommodation that is brand new but at lower prices,” says McCauley. “This has further attracted homebuyers who don’t mind a longer commute.”
With buyers now having more choices, McCauley says sellers must consider the opportunity cost when they want to sell in this market. “There is merit, in many cases, to release the equity tied up in a current property if that money can work more advantageously for you elsewhere,” he says. “However, if you can hold onto the property and wait out until the softening in the market decreases, then this might be the best action to take.”
Ankush Midha, manager of Unique Zone Real Estate, agrees that sellers should hold on or delay any decision to sell unless they need the cash desperately or have some other greater opportunity. “If as an investor you feel that you can sell your current property and buy something bigger, which is available at an attractive value, then you should consider it,” advises Midha. “We are seeing a lot of this happening in the market at the moment. We advise sellers that can hold to hang on to their properties till next year, as we expect a positive correction in the market to kick start from Q1 2020.”
Current sale trends
Being a buyer’s market, investors can enjoy various incentives. “Several developers, including MAG, National Properties, Emaar, Azizi and Nakheel, are offering a range of payment plans and incentives making property purchase more affordable,” says McCauley. “Even rent-to-own (RTO) schemes have a seen a resurgence in the last two years and are being offered by several developers, which will continue and become more popular should the market continue to soften further.”
With the increase in supply, developments in Dubai South, Dubailand and Town Square are proving popular because of the affordable pricing for both completed and off-plan units, he adds. “From a yield perspective, apartments in most cases offer better returns than villas so communities such as Dubai Marina, International City and Discovery Gardens also continue to prove popular with investors,” says McCauley.
Midha sees a resurgence in the resale market, especially for ready and near-ready properties where bank finance is now available. “I believe the market has seen an adequate correction and prices have been steady now for a while, signalling a bottoming out,” says Midha. “This is the right time for both investors and end-users to pick up properties.
“We are seeing a lot of resale in all newly delivered areas like Dubai Hills Estate, Dubai Creek Harbour, etc. and some older settled communities such as Downtown and Greens. Also, we are seeing a rise in the number of first-time buyers and mortgage buyers. Old investors are looking for opportunities to pick up value deals. However, a big help to the market would be a relaxation by the UAE Central Bank in the loan-to-value ratios for first, second and third properties, as the ratios are very high at the moment.”
For buyers both the primary and secondary markets would be attractive, says Mario Volpi, sales and leasing manager at Engel & Volkers. “If buyers are having difficulty arranging bank finance or do not have the necessary 25 per cent down payment then the primary market is a good alternative. Developers are offering attractive payment plans to ease the payments over the construction phase and sometimes post-handover,” says Volpi.
The secondary market, he adds, has been quick to absorb the ups and downs of demand. “Currently, there is great interest from residents, who for some time have been renting but are now considering buying their own home due to the softening of prices,” says Volpi. “I believe that the Expo effect will be felt strongly but not necessarily any time before the six-month extravaganza has begun. Many visitors are scheduled to come to Dubai for the first time and if only 1 per cent of these proposed visitors go on to buy property here, this will be a massive shot in the arm for the Dubai property market.”
Tips for sellers
If you need to sell any time soon, McCauley advises to set a realistic price and be negotiable. “Secondly, appoint an estate agent that has a successful track record in selling in that community. Lastly, ensure that the property is well presented for sale, i.e. paintwork and maintenance is conducted if required, it is tidy and decluttered and to go even further, one could even consider home staging.”