Is it safe to buy off-plan properties now?

Dubai: If you are torn between investing in a ready property and one offered off plan, remember that the fundamentals always apply. Purchasing a property off plan can provide you with superior capital gains by the time of completion provided the market continues to exhibit price increases beyond the completion date.

However, you will need to make sure that your off-plan purchase is consistent with your property portfolio strategy. If so, then proceed as there are some great opportunities to be had. Remember, too, that off-plan purchases are just as affected, sometimes more so, by market fluctuations the way completed assets are impacted. You need to carefully consider estimates of economic growth, population expansion, the number of competing projects in the pipeline and the eventual industry inventory position.

Location is critical and cannot be underestimated because it is a prime determinant of property value. The value of a particular location is usually derived from the levels of lifestyle convenience, pleasure, harmony, security, future economic value or even status. Whether your basis for choosing is an outstanding view or proximity to dining, leisure and business districts, or access to schools, hospitals or public transport, or the ‘status value’, the perceived benefits a location may bring to a prospective buyer can account for as much as 90 per cent of a property’s worth.

Be smart about the ‘product’ you are buying into. Look for certain property types complete with amenities and facilities in locations you believe will see future high demand. Do not assume that all property types in all locations will improve in value homogeneously as no market works this way, and always check the latest Metro route planning as the impact of the Dubai Metro on property rates in ‘Metro-adjacent’ areas can no longer be discounted.

You will need to do some careful financial analysis which will enable you to determine the value of the discount that you anticipate receiving by buying off-plan. Sit with your broker and determine the net advantage to you. Many projects are being sold with easy payment plans which can be of tremendous value in minimising your capital exposure before completion.

Deal only with reputable developers and make sure to check as to the status of the escrow account of the development.

The writer is managing director, Harbor Real Estate & instructor, Dubai Real Estate Institute