Dubai: As rents keep gaining, developers in Dubai are using that as an argument to convince potential end-user buyers to invest in a home rather than keep renting. And developers with newly – or ‘soon to be’ - delivered homes are backing that with convincing offers.
Their pitch is straight-forward – move in right now and pay off in 3-8 years. And keep the monthly payments to levels that would be comfortable enough on the income of these end-users. Developers with completed projects at Jumeirah Village, Al Furjan, and even more upscale locations such as MBR City are bringing out these offers.
When rent increases have hit 20-30 per cent plus, potential buyers are taking a closer look at their options. (According to CBRE, at the half-year mark, Dubai’s rentals gains were averaging close to 25 per cent while property values were up 9 per cent.)
There is another reason why the payment periods are being extended by developers. Since local mortgage rates went through successive 0.75 per cent rate hikes, there has been a drop in mortgage-backed sales. And that essentially means end-user buyers feel it’s getting too pricey to think of buying a home now, with property values also increasing quite significantly.
“The property market needs end-users to remain interested,” said a developer who has just brought down the down payment and extended the payback period to 5 years from three on a newly completed project. “Yes, offplan sales are back to dominating transactions in Dubai, but those are mostly investors buying or those interested in the Golden Visa programmes and not in a hurry for a property to stay in.”
Based on whatever data is available, including those from the summer months, there are no signs of an across-the-city slow down. In fact, some areas that had seen 10-15 per cent increases in the last 12 months are recording faster growth.
“There are clear signs that rent increases are spreading from the centre – made up of Dubai Marina, Downtown and Business Bay – onto more locations in the city,” said an estate agent. “Non-freehold locations are seeing clear rent gains, even at some of the older buildings.”
September’s data should provide a better indication of what’s in store.
As for developers, rent gains could turn out to be their best ally when it comes to targeting end-users.
Another round of rate hike
This week, the US Fed will serve up a third sizeable rate increase, which will be mirrored in local lending rates. The Dubai and UAE property market has through recent rate increases not just sustained the sales tempo, but saw the best summer in more than a decade. But developers know they still have to do their part – and newly delivered homes are part of that plan.
A look at recent property offers show clear trends emerge. Whether in JVC or MBR City, the developers are focusing on longer payment plans and smaller down payments.
“We find that end-user buyers are turning more towards new/ready homes than offplan,” said an estate agent. “Their immediate concern is to find an alternate to paying rents. Ready homes serve that purpose.
“It’s in the mid-market that we are seeing these buyers coming in, for properties priced around Dh750,000 to Dh1.2 million. These buyers were paying Dh50,000-Dh75,000 as annual rents and were probably looking at 15-20 per cent increases on their leases.”
More of such buyers are what Dubai developers will be focussing on.
