Dubai: Developers in Dubai are in a rush to launch their latest projects or release more offplan units at their existing ones – but this time it’s not just about trying to meet demand.
A recent report by global rating agency S&P spoke about the chances of likely price corrections in the Dubai property market at some point in the next 18 months or so, which could ‘lead to lower prices and rents’.
This has indeed come as a wakeup call for many developers with offplan launches in the offing. Many believe that bringing forward their sales puts them in the best position to counter any medium-term slowdown.
This means more launches offering monthly payment rates of under 1% of the property value – and in some cases, guaranteed returns. Other launches have been backed by monthly payment plans of under Dh5,000 a month and with payment plans stretch over 5-8 years. Anything, it seems, to get property buyers interested.
Interestingly, there are now offers in the market for ready-to-move-in homes with up to two-year payment plans.
Developers clearly are gunning to close sales on new projects in the ‘shortest possible time’. “The S&P report on Dubai property prices and rents has been an eye-opener,” said a developer source. “It’s not just about property prices softening, if rents were to start dropping in 18 months (as the report says), then investors may start thinking about whether to buy later.
“Plus, there will be a significant portion of new investors and end-users wanting to test out options in Expo City Dubai offplan launches. That’s going to give most other locations increased competition in terms of prices and future price growth.”
October offplan launches surge
A record 18,000 or so new offplan properties were introduced into the Dubai market in October alone, according to data from Reidin-GCP. New releases shot up from the 11,000-12,000 units a month average in the four months prior to October.
In the year so far, actual sales have kept up with the speed at which new launches are taking place. October saw around 14,000 offplan units selling, going past the previous monthly high of 11,698 in May.
"Our key predictions for Dubai real estate are that sales prices per square foot in the primary market will remain stable in 2025,” said Sapna Jagtiani, credit analyst at S&P Global Ratings. “(But) the pace of new launches will decrease over the next 12-24 months, and that the share of luxury developments will reduce in 2025."
But there are now reports saying average price per square foot in Dubai offplan sales have seen some corrections in the last two months. It could be that most of these were mid-market homes, which explains the lowered psf values.
Delay decision to buy?
This is the bit that has developers worried, especially those in the mid-market segment. Their thinking is that if investors start to believe there is going to be a price correction – whether that’s 18 months from now or whenever – it could delay decisions.
That could then feed into the whole pricing cycle too, with developers competing to offer more incentives or straight out soften their asking prices. That would, if left unchecked by developers or market trends, could speed up rush to a full-scale price correction.
Luxury seems to be doing well
In the premium/super luxury space, developers and pricing seem to be more elastic at the moment. This year has already seen its share of new projects that cater to the wealthy and there is plenty more to come.
Nakheel has just released more villas for the Palm Jebel Ali, starting Dh18 million. The Sharjah-headquartered Arada is keeping its Dubai offplan kitty busy, adding the W Residences at Dubai Harbour. A three-tower seafront development it will add over 400 Marriott-branded apartments in the Dh5 billion complex. Arada also has an Armani project in Dubai...
A Trump Tower too
The FTSE-listed Dar Global has spoken about formally launching a Trump Tower in Dubai sometime in 2925. (The ‘Trump’ brand is already well represented in Dubai, through a long-standing alliance with Damac Group.)
"There seem to be lots more happening - or about to - in Dubai's luxury property," said a developer. "On the face of it, they can afford to wait longer for buyers to come in. But it will not be the same with mid-tier developer launches.
"Because there will always be another mid-priced project starting sales within days - not even weeks - after the previous one."
