Off-plan residential sales dominant in Q1 2017. But convenient payment terms do not come without risks.
Date:22 June 2017
Glossy brochures and convenient terms of payment are two of the main drivers that have allowed residential off-plan sales to reach approximately 50% of the total residential sales in Dubai in the first months of 2017.
Investors feel the opportunity to put a first feet in the Dubai Real Estate market without the need to initially expose in large capitals to purchase their property or property portfolio.
Especially in prime residential locations as Downtown Dubai and Dubai Marina, the off-plan sales have taken off, supported especially from the proactive marketing campaigns of the most reputable developers.
The fact has created a negative impact on the number of transactions in the secondary market, but it is surely worth to try to analyze the pros an cons of the two investment strategies.
For those who have been in Dubai at the time of the crises, it is clear in mind the absolute importance to invest in a property that is completed. There have been a number of projects never completed, not even ever started where investors had to accept either a loss or a swop with other properties built by the same developer, not always with a clear chance to swop “apple with apple”.
In some occasions the outcome of the construction doesn't come close to the brochure presentation, setting the property “as built” value sometimes lower than the amount invested. A difficult loss to recover.
Finally the surrounding infrastructures of the development are often not completed for a few years after the property has been delivered, creating complications with the possibility to rent or sell.
The above is not the every off-plan scenario, but the real estate professionals who have a long lasting experience remember well the facts mentioned above and tend to refrain from involving their clients from taking those kind of risks, or at least they make sure the client is prepared to take, and eventually absorb those level of risks.
The completed properties may require an higher financial commitment at the beginning, but they are immediately ready to produce rental income, the quality of the construction is well known as well as the quality of the building or villa compound's maintenance, along with the property maintenance fees.
Finished property allows the investor to make a better risk assessments and predict effectively the investment profitability, yield, and its cash flow.