Temperatures in Dubai might be cool at the moment, but the off plan property market remains red hot!
According to The National, off plan sales hit a 12 year high in Q3 2022 in both value and volume, with 25,456 sales recorded. Global economic headwinds might feel like nothing more than a light breeze in Dubai, but real assets, especially off plan property are proving to be the shelter of choice for many investors looking to protect and grow their capital in the UAE.
What is off plan property?
Off plan property is the term used for buying real estate before it’s built. Buying off plan is generally cheaper than buying already constructed real estate with between a 10-30% reduction from existing constructed real estate.
Why is off plan property cheaper?
Off plan property is cheaper than pre-constructed property as you’re buying into a plan. There might be like for like comparisons price wise in the area based on the plan vs existing builds, however this value is not guaranteed until construction is complete. The price of off plan property increase as a project gets closer to completion as the investment risk reduces and those who are looking to move homes quickly enter the market.
What happens if a developer doesn’t deliver?
As with any investment, your money is never 100% safe. Even with pre-constructed real estate, your property could decrease in value from your purchase price and you could lose some of the invested capital.
However, since the 2008 global market crash the Dubai Government has introduced a number of measures to protect investors from losing their money, including the Escrow Law. The Escrow Law means that all of the client monies collected by the developer, towards the purchase of an off plan property, must be held in a segregated Escrow Account and will only be released to the developer upon the project reaching certain construction milestones. This makes it in the developer’s interest to build on time and to finish the project.
How do I purchase off plan property?
To purchase off plan property, you can either go direct to the developer or through a licenced real estate agent, such as those at Prestige Luxury Real Estate. Agents are a great option for those who want help finding the right property and are open to numerous different developers. Agents have access and oversite across the whole market and remunerated by the developer not the client.
Once you have found the right off plan development for you, there are several ways to make to make payment, the most popular being cash or payment plans.
Payment plans allow buyers to spread the cost over a period of time. These typically take the form of 50/50 (50% paid during construction and 50% on completion) 60/40 or 40/60. Some are even offering plans where after you have paid your deposit, typically 10- 20%, you can pay between 1% and 4% monthly over 5 years. There are many versions of the payment plan, it all depends on the developer or development.
Is it easy to sell off plan property before completion?
There is a booming secondary off plan market in Dubai. Some people buy off plan property with the intension of simply selling as the property nears completion and the price rises. This is something your real estate agent can help with.
What should I consider if I’m buying to rent?
Buying to rent could offers investors return on their initial investment price as the completed property rises in value and meets market rates, but also a yearly yield on their investment on top of this.
The rental market is hot in Dubai right now and your real estate broker should be able to find you a tenant with ease. However, some developers also directly team up with hotel chains and will offer a guaranteed ROI of around 7-8% on a short-term bases, letting the unit out on your behalf.
In summary, off plan property is a fantastic option for those looking to buy a future home, buy to let or simply as an addition to their investment portfolio.
If you’d like help finding the right off plan property, contact:
Perry Walton– Off Plan Specialist Broker
+971 (0) 585 527 302 / [email protected]
RERA: 55988
