19.04.2024 03.05.2024 512 0 0
For several years now, the whole world has been watching the real estate market in the UAE with surprise. In 2023, more than 133,000 transactions were concluded here – 37% more than in the previous year, and the cost of housing increased by 4.6–22%, depending on its type. Nikolay Kuznetsov, head of the Investor Relations Department, told about which housing is better to choose as the first purchase, when it is more profitable to buy an object under construction, and when it is better to look at the finished one.
What is the ratio of under construction and finished real estate in the Dubai market today?
Today, perhaps, there are more facilities under construction than there are offers on the secondary market. But the issue is always volatile. If, for example, we take the period of the pandemic, then many construction projects were suspended. On the contrary, there were many offers for secondary housing.
Will the trend continue?
Based on the plans of developers and strategies that now prevail among investors, as well as from the number of requests that we receive this year, we see that the trend of choosing an off-plan remains. Moreover, the number of new projects, investors, companies (private, small, well-known, little-known, from Russia, India) is growing. We are not only engaged in the sale of real estate, we also accompany land sales transactions, help to obtain all permits, select contractors, subcontractors, prepare contracts. Hence the conclusion that the off-plan market is developing.
It is important to note that there are many assignments on the market. What is it? For example, when an investor enters the pre-launch stage, the capitalization of the object is the same. After 2-3 months, the project is launched, prices rise, and the investor sells the object. This is a short-term strategy. If we take into account such situations, the secondary housing market will be even higher than the primary one.
If we take the classic situation with secondary housing, as we used to, when a client bought an apartment, lived and decides to sell them, the data will be different. As a rule, the owner puts the price above the market, and it is listed. It will sell for the specified amount – good. If he doesn’t sell, it’s not urgent. There are fewer such offers than primary real estate. Not everyone wants to sell, many just live. This trend is observed among Europeans, as well as Russians and citizens of the CIS countries. They come and buy real estate for themselves, including on the secondary market, in order to immediately stop by. They do not have the opportunity to wait until it is completed.
What type of real estate is being bought more often today? Why?
Mostly apartments and townhouses are the most popular sales. The villa is in the third place. Their prices start from $2 million on average. Today, villas give investors the highest profit: this trend took shape in 2023 and is still relevant.
Sometimes we receive distress deals – offers for the sale of real estate at a price slightly below the market. This is due to the fact that a person urgently needs to sell a house. For example, we are now seeing an outflow of Israelis from the UAE. They bought villas, now they need to leave, so they are selling them at a good discount. There are villas seized by the bank. It happens that an investor took out a loan from a bank to buy a house, something went wrong with the business, it did not work out to pay, as a result, he gave the property to the bank. We can buy such villas and offer them to our clients. These are quick deals, such objects are usually sold instantly.
When is it better to choose a ready-made property? When is it under construction? Are there any factors other than personal preferences?
It all depends on your goal. For families moving permanently, the comfort of housing and coziness are important, while investors are more likely to focus on profitability and capitalization indicators.
The secondary market is a less attractive investment option. The best yield is available when buying from a developer: the capitalization of the cost in this case can range from 30 to 100%.
If you are looking for investments with a long-term perspective and high capitalization, it is worth considering boutique real estate. To generate passive income, many investors prefer to buy ready-made facilities and rent them out. However, if your capital is significant and you are willing to take a small risk, you can consider projects at the pre-pre-launch stage, with subsequent sale after completion or during construction, as large capital opens the door to good developers.
What are the advantages of real estate under construction and ready-made? What are the risks? Is it safe to buy a property under construction in Dubai? And the finished one?
Advantages of ready-made real estate: bought and you can live right away. You can take out a mortgage, the rate is up to 6%. The first installment of 20% is paid immediately, the remaining 80% is paid in convenient payments.
The off-plan is suitable if there is an opportunity to wait. Pay less. Many developers offer good installments. You can find options when it is valid for up to 5 years after the completion of the object.
There may be risks if you meet an unscrupulous broker or do not understand the market. For example, you buy an apartment that you like without any evaluation, but in the end it is difficult to rent it out, and instead of 8-10% ROI you get 6-7%. An unscrupulous broker may sell not what you need, but what you need to sell to him. In this case, you can buy something not at market value, but more expensive, or get an object that will be difficult to resell at a profit or rent out. There will be no loss as such, but there will be a loss of profit.
What needs to be checked for each type of property?
First of all, I repeat, you need to understand what you are doing, why you come to the market. Next, find a good broker. He will check the documents, make sure that the client pays exactly for what he liked, that the developer did not make any mistakes. Many of our clients, for example, do not read in English, so we need professional help here.
For secondary housing, it is important to check the Title Deed (a document confirming ownership) to make sure that the apartment really belongs to the seller, that there are no encumbrances. That is, you need to approach the process very carefully. Here 98% of transactions go through a broker, this is the safest option. You can arrange everything yourself, provided that you know the seller well and generally understand the specifics of the procedure.
Do I need to check the off-plan personally? And secondary housing? Is it worth coming to Dubai for your first purchase?
There were no escrow accounts here until 2010. Rather, this is how: Law No. 8 Concerning Guarantee Accounts of Real Estate Developments in the Emirate of Dubai came into force in 2006. But almost all developers continued to accept payments to their accounts, and not to escrow. And it was only after the crisis of 2008-2010 that the UAE authorities began to really strictly control its compliance. The developer cannot freely use this account or use the money at his discretion. This means that the money paid by the buyers of the various real estate units in the project is protected until the moment of delivery of the object. Before that, the money went directly to the developers, and they did not always manage them wisely. For example, instead of building facilities, they invested this money in an attempt to earn extra money. The developer will receive the money in full only when he hands over the object. Therefore, when the crisis occurred, many were left without apartments and without funds. Then escrow accounts appeared, and now everyone works through them, so there is no risk of losing money. And to go to see the developer personally, there is no great point in following the process. Many of our investors buy real estate remotely and are quite satisfied. But this, again, is about investments. If you are looking for a place to live for yourself, it is always pleasant and interesting to come and see everything in person.
At what stage of construction is it better to purchase an off-plan? Is it worth choosing a project at the excavation stage?
Yes, it is worth choosing at the excavation stage, especially if you have the opportunity to go to the pre-pre-launch and make a deposit by fixing the price. If they let you in, of course. Because, as a rule, they let their own people into such projects – a group of investors who go from one object to another with the same developer. At the pre-launch, the price will increase by 10 percent, and at the launch stage, the price difference can already reach up to 20%. A lot depends on the project, on the market situation, but the marginality there is very high.
Let’s summarize the results. Signs of a high-quality and low-quality off-plan project?
See the developer. His story. See the location. You need to understand the project itself, look down to the brandbook, what is used, what materials, which subcontractors. There are developers with whom we do not work in principle. There are those with whom we work from year to year, but you always need to look very carefully at what they offer and at what price. It happens that at first the developer offers one price, and then suddenly reduces it, and this is also unpleasant for the buyer.
Signs of high-quality and low-quality secondary housing?
Wear, age of the building, location, developer. There are developers who will not look at the building without tears in 3-5 years. It is safe for life, but the appearance leaves much to be desired. The management company may be unscrupulous, but sometimes you can only understand this when you move in. You need to look at how the repairs are being carried out. Are there any so-called partitions in the building, when apartments with 2-3 bedrooms are bought, partitions are put inside, and a large number of people live there. The neighborhood is obviously questionable. We do not recommend purchasing such housing. It is difficult to rent and sell it, and it will become unusable faster and, as a result, the cost will fall.
What is your personal recommendation to novice investors?
You need to know the market. To come, to watch, to study. Go through presentations, study the background. It is important to really evaluate what the manager is telling you and understand what is true. Just reading on the Internet is not enough. They write different things, and it does not always correspond to reality. There are more than 16,000 real estate agencies in the UAE. Just think about this figure. Many are closing down because they are not selling what people need, but what they need to sell to them, to agencies. Plus the lack of competencies. As a result, the reputation is falling due to dissatisfied customers and investors. As a result, they stop working with them. Many people want to try, but in the end it doesn’t work out. In general, the risks of buying real estate are minimal now. But you can buy an object based on emotions and get less benefit. Therefore, consider choosing a broker wisely.
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