New launches in Arabian Ranches offer similar properties at lower prices on an off-plan basis Image Credit: Gulf News Archives

Official data and blically available evidence and a variety of new reports indicate that Dubai is enjoying a relatively stable property market, with softening prices acknowledged as a much-needed correction. The emirate’s real estate sector has seen several new developments in recent months, including increased price consciousness, innovative payment plans and a redefinition of the city’s urban boundaries.
The most significant trend, however, may be a swerve from secondary market purchases towards units in off-plan properties. The first half of 2015 saw 24 such projects launched, 19 in the second quarter alone, data from Cavendish Maxwell shows. The consultancy’s Dubai Residential Market Report Q2 2015 says 1,781 off-plan units were launched in the first quarter and 7,900 in the second, all scheduled for delivery in the next three years.“Initiatives by developers to encourage single-unit purchasers alongside flexible payment plans have opened up the off-plan market to new end-user and investor markets,” it says. “This is a significant step in this emerging market, and is encouraging [for] first-time buyers who may previously have been in the wait-and-see category.”
Another perspective comes from real estate portal Lookup.ae, which clocked 120 new project launches in the past 24 months in Dubai. Its Head of Research, , and it is the off-plan segment that will gain in strength. Eric Hodges, quotes independent reports of a correction of 7 and 10 per cent in mature communities over the past 12 months. According to Hodges, “All the data out there indicates that after appreciating an average of 35 to 45 per cent since 2012, the market for ready properties has cooled,” he says. “However, the off-plan property market has become particularly attractive with a large number of developers offering exceptionally well-priced properties and terrific payment plans.”
Lookup.ae is so confident off-plan properties are rising that it launched a dedicated portal this month. The first of its kind in the UAE, its Off-Plan Properties Search page lets buyers look at under-construction properties in about 40 developments across Dubai.

Softer pricing and staggered payments
Finance is one of the primary factors driving the shift from ready purchases in secondary markets to off-plan projects. With property prices declining, investor confidence is at a low and many potential buyers see no compelling reason to buy in the secondary market. On the other hand, softer pricing and easier payment plans improve the investment appeal of new projectsvastly more appealing from an investment perspective.   
The low prices are at least in part due to the onslaught of off-plan project launches in Dubai over the past 12 months, according to a June report by Unitas Consultancy and real estate information portal Reidin.com.
 Their June report says the off-plan market has driven prices of secondary market properties down by 15 per cent. “Initially, off-plan launches were at systematically higher prices than what were prevailing in the secondary market. This trend has reversed in the past 12 months, where off-plan launches have been at levels that have averaged 20 per cent below the secondary market rates. This has caused prices to soften in the secondary market by approximately 15 per cent on a city-wise basis.” At Arabian Ranches, for example, new launches offered a similar product at lower prices, leading to higher interest in off-plan projects versus the secondary market. “Although there was locational differences, investors responded to the new lower-priced launches by switching from the ready to the off-plan market, causing prices to start declining in the third quarter of 2014,” the report states.
Official figures bear this out: the Dubai Land Department saw 64 per cent fewer residential deals registered in the second quarter of this year compared to the first.
As demand weakens, companies are competing to attract investors. Developers are either slashing deposits and offering deferred payment plansto attract buyers, or presenting schemes that require smaller upfront sums, with the bulk only to be paid upon completion. Data from Reidin.com and Unitas shows that 55 per cent of all off-plan propertylaunches now offer back-weighted payment terms, compared to only29 per cent two years ago.
“Developers have designed off-plan payment plans to provide a lower entry price [point] to buyers,” explains Adam Wisher, Head of Development Advisory & Real Estate Research at Cavendish Maxwell. “Expatriate buyers need to pay a 25 per cent deposit and Emirati buyers a 20 per cent deposit in order to secure a mortgage for a secondary market property. On the other hand, they only need to put down as little as 10 per cent for an off-plan purchase.”
Geraldine G. Peyraud, Executive Director of Driven Properties, has slightly differing views. “The price per square foot is almost the same, but in any off-plan project you can expect a 30-60 per cent profit when it gets completed,” she says. “The new payment plan structures are amazing, and some even stretch over a few years after delivery.”
Besides this, she says, “Flipping has disappeared and investors are now buying with a long-term view.”

Popular new projects
Cavendish Maxwell highlights two interesting off-plan sub-trends. The first is rising interest in town houses: of the 7,900 units introduced in the second quarter of the year, town houses made up 17 per cent. Wisher feels this may be a result of pricing and because they are suitable for families. “The larger amount of new townhouses being released is a symptom of developers pushing a more affordable product.“Among the current offers, an off-plan three-bedroom town house can be purchased for less than Dh2 million with a flexible payment plan. This is a good starter unit enabling young families and couples to get on the housing ladder.”
The second sub-trend is an extension of Dubai’s urban district. Both brokerages cited here report that the majority of developments launched in the second quarter are in secondary locations such as Dubailand, Dubai Silicon Oasis, Mohammed Bin Rashid City — District One, and Dubai World Central, which will extend the development borders of the city inland, as these locations become more established and populated.
Peyraud calls Dubailand and Town Square by Nshama the new investment magnets. “They may feature smaller units, but have low and affordable prices and offer easy access. Emaar’s Downtown Dubai continues to rank high, with premium finishes, great views, and access to The Dubai Mall.”
Collectively, these are the communities and developers in Dubai likely to see maximum interest — and investment — in the ensuing months. As things stand, the sector’s pricing dynamic favours the buyer. Sellers are expected to become more generous with prices, payment terms and other incentives to buoy public demand in property.