Off-plan sales slowdown in November supports HYA focus on a consistent secondary market

Considering the intrinsic uncertainty of the off-plan market segment, High Yield Advisors (HYA) continue to dedicate its time and efforts within the secondary market, and the more established areas of the city. Moreover, advising our clients to make more secure investments which yield a more stable investment solution, protects us from being affected by the volatility that off-plan purchasing has produced in the past five weeks, as widely confirmed in the latest local press release.

In the secondary market, action stayed constant in November, and remained consistent with the experience throughout this year. Interestingly, reasonable prices are additionally encouraging buyers to look at Dubai Sports City and Motor City.

In the secondary market investors keep moving towards smaller and therefore more “liquid” property sizes. “With an intelligent portfolio of small properties, spread within selected buildings in selected well established areas of Dubai, the investment becomes well shielded from temporary rental vacancies and specific areas price fluctuation. Risks remain under control and a yields are sustainable”, said Patrick Parmeggiani, HYA Partner.

The market shows trends of split direction heading somehow to either relatively affordable or luxury property type.

Investors may be reminded of the 2009 crisis that left many off plan investors in a troublesome situation. “There is a general concern about off plan property oversupply, even for the most experienced of investors. The impossibility of short term re-sale at a premium, or the unrealistic guarantee of high yields in years to come (when the properties will be completed) become important inhibiting risk factors against the flashing brochures and enchanting payment plans” commented Giovanni Caradonna, Partner at HYA.

From a financial viewpoint, the coming VAT introduction on January 1st, 2018 ought not have much — or any — effect on residential property demand. The authorities have set zero VAT rate on all residential purchases from 2018. But developers will in any case be paying VAT on all their building materials and related construction costs. The amount of this is expected to be reflected in their future property launch prices which we predict could affect further off-plan demand, due to “indirect VAT inflated” prices.

On the other hand the secondary market would remain clear from any VAT impact on property buy and sell transaction, reinforcing the characteristic of stability and resilience of this specific Real Estate sector.



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