Dubai's Off-plan Appeal: Caution Advised for Ready Home Sellers.

Image credit-Arabian Business

Property owners in Dubai, holding ready units, are advised to exercise patience and refrain from hurriedly selling, as they face a price disadvantage compared to off-plan sales from developers. Market data indicates that sellers of ready homes may struggle to achieve their asking prices, regardless of the property's location, be it Downtown, Dubai Marina, or Jumeirah Village. The price per square foot for ready properties is currently at a discount compared to off-plan options, presenting a dilemma for property owners looking to sell. The average gap in price per square foot between off-plan and ready properties in Dubai has been expanding, reaching up to 50% or even higher in some cases, according to a report from Reidin-GCP.

The widening gap is evident across various freehold locations in Dubai, including sought-after areas like Jumeirah Village and Arjan, where the disparity has more than tripled compared to 2021. In Dubai Hills, a super-premium location, the price gap for ready villas is nearly 60% lower than off-plan options. Similar trends are observed in other prominent locations like Dubai Marina and Business Bay, where off-plan properties command significantly higher prices per square foot compared to ready properties. For instance, at Dubai Marina, ready apartment prices stand at Dh1,410 per square foot, while off-plan properties are valued at Dh2,550.

The primary factor contributing to this price gap is the cautious approach of end-user buyers. Throughout 2021 and the first half of 2022, end-users were a dominant force in the market, taking advantage of low mortgage rates and recovering property values. However, the current scenario has seen a shift, with mortgage rates reaching their peak and developers aggressively promoting off-plan sales, constituting over 70% of overall residential deals in Dubai. As a result, buyers are opting for off-plan properties, giving them more time to pay off or secure mortgages, while end-users, who primarily prefer ready homes, are delaying their purchases.

Investors who entered the market during the peak period are now holding off on selling, anticipating higher prices in the ready market. Many of these investors made purchases backed by mortgages during a period of low fixed-rate payments, providing them with the flexibility to wait until the price gap narrows. With mortgage rates at their peak, end-user buying demand has softened, contributing to the existing price dynamics. The Reidin-GCP report suggests that this divergence in off-plan and ready prices is unlikely to be sustained in the long term. Future off-plan launches and potential stabilizations or drops in prices, coupled with mortgage rate cuts, may lead to a natural shift towards ready homes among buyers. The report concludes that buyers and investors can reasonably expect off-plan prices to trend downwards, especially as the Dubai market receives more supply.

In conclusion, property owners with ready units in Dubai are advised to exercise patience and wait for market dynamics to evolve. The current price gap between off-plan and ready properties is seen as a temporary phenomenon influenced by factors such as aggressive off-plan sales, peak mortgage rates, and a shift in buyer preferences. As the market adapts to new supply and potential changes in mortgage rates, the price dynamics are expected to undergo shifts that could make ready properties more appealing to buyers. Until then, property owners holding ready units are encouraged to monitor market trends, stay informed about future developments, and make informed decisions based on the evolving real estate landscape in Dubai.