Sales incentives and other creative payment options being exhausted to attract investors
Unit prices in Dubai’s off-plan market are contracting, leading to lower sale prices.
Off-plan property prices in the emirate stood at AED1.32 million (USD359,360) on average in 2018, down from AED1.4 million in 2017 and AED1.53 million the previous year, data from the consultancy Core showed.
“This illustrates that the main adjustment lever employed by developers to compete in the off-plan market has been by lowering entry prices rather than adjusting to other market factors,” Edward Macura, partner at Core, was quoted as saying by Khaleej Times.
The drop in off-plan property prices is expected to lure more tenants as well as long-term end-user buyers, Macura added. “As more unit options become available, this trend could impact the overall rental market and in turn lead to contracting yields, potentially reducing investor demand in the short to mid-term.”
This year, up to 60,000 units are expected to be completed in the emirate, leading developers to become more competitive in pricing and compelling some to offer extended payment terms, according to Craig Plumb, head of research for JLL Mena.
“In fact, with traditional sales incentives almost exhausted, some developers are offering buy-back options in case of job loss and annual stipends for project delays,” noted John Stevens, managing director for Asteco.
“The sheer amount of current/future supply, resulting competition between developers and drop in prices puts the negotiating power firmly in the hands of the buyer, thus attracting people with a medium- to long-term investment horizon.”
Wealth-creating industries are required to attract a larger population to occupy the property being built, he added.
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