Developers are edging out individual sellers with competitive pricing and payment plans
Off-plan sales are currently taking the wind out of the sails of ready property transactions in Dubai. This is a result of competitive pricing and creative payment plans by developers to attract investors and end-users. With a large volume of units at their disposal, developers can control pricing and slowly edge out individual sellers.
Developers are positioning their off-plan properties at marginally lower entry points than existing products of similar build quality, with attractive payment plans to boot.
“The secondary market is struggling in the face of stiff competition from off-plan projects,” says Mario Volpi, chief sales officer, Kensington Exclusive Properties.
Off-plan sales from reputed master developers are having a detrimental effect on secondary market sales, particularly in prime apartment districts. While owners of ready properties try to sell their units, master developers offer products positioned at attractive entry points to a similar target pool, particularly investors. With a wider product base, developers can exercise a higher level of price control on the sub-market and largely have an upper hand over individual landlords.
There have also been some off-plan launches of low to mid-market product in areas such as Dubailand and Jumeirah Village. However, products in these areas are primarily positioned at similar or higher entry points, keeping the secondary market relatively active, a recent report by Core Savills pointed out.
“If the owner has a ready property that is priced competitively and unmatched in the district in terms of build quality and amenities, it is expected to be absorbed easily. The issue of delay in take-up may arise in sub-markets where there is a glut of newer, better build products available at similar or lower entry points,” says David Godchaux, CEO of Core Savills.
For instance, the secondary sales market in Downtown Dubai has remained slow as owners are withholding their existing units and are not keen to sell at lower premiums. The increase in demand in the off-plan market has caused a spike in overall transaction levels with a 112 per cent higher off-plan activity year on year. However, sales prices continue to contract (3.5 per cent drop year on year) as developers are able to maintain a higher level of price control on the off-plan market, affecting the overall area average.
According to Core Savills, Dubai Marina saw the highest spike in year-on-year off-plan transaction volumes at 165 per cent, underpinned by many project launches such as Vida Residences Dubai Marina, One JBR, Bluewaters and Studio One over the last few months. Most of the sales prices of new launches are marginally higher than the area average due to the premium lifestyle offerings and build quality. This has led many buyers to lock in early-bird incentives.
“This is clearly a buyers’ market. Hence, sellers have to make realistic offers. Only these properties are moving. The difference between asking price and settlement is now about seven to 10 per cent. In a sellers’ market, this range widens to 12 to 15 per cent,” explains Sanjay Chimnani, managing director, Raine & Horne Dubai.
“Sellers of ready properties have to be competitive on price but this is where the problem lies as too many sellers are just waiting for the market in the hope the situation improves instead of listening to their agent’s advice in reducing the price. If a property is not selling, the problem is always the price,” adds Volpi.
The prices for certain off-plan projects are cheaper than the secondary market. Studios in Dubai South, for example, are selling for less than Dh300,000.
However, the secondary market is active in some sub-communities in Dubai.
“The Palm Jumeirah saw a 44 per cent rise in secondary sales compared with Q1 2016 figures. The Springs and The Meadows saw a spike of 16 per cent in transaction numbers in the secondary market. As the community gets older, and newer options become more accessible at similar entry points, a small section of demand is expected to shift to areas such as Arabian Ranches, Mudon and Mira. Jumeirah Village also saw an increase of 15 per cent in secondary sales as many projects were delivered,” observes Godchaux.
According to Chimnani, secondary sales are active in the more developed areas with units in the Dh800,000 to Dh1.8 million price range. “Downtown Dubai, Dubai Marina, Jumeirah Lakes Towers, The Greens, Dubai Silicon Oasis and Dubai Sports City are areas where we see good momentum,” he adds.
All rights reserved to the initial publisher for Khaleej Times.
Collected and published by Arms &McGregor International Realty® editorial team. Get in touched with us at [email protected]