Dubai: After the summer hiatus and despite mounting concerns over a weak transactional market, Dubai’s developers are back in the business of off-plan launches.
Within this week, Deyaar flagged off sales for a major chunk of its Dh3 billion plus ‘Midtown’ project (units priced under Dh1,000 a square foot), while Nshama announced a further round of releases at Town Square through the ‘Jenna’ apartments, with a two-bed priced from Dh749,888.
On Shaikh Zayed Road, Damac Properties got new outdoor media announcing an imminent association with Bugatti — not for the supercars, but for ‘Bugatti’ branded residences at its Akoya Oxygen development. The developer is also having the pre-launch of the 29-storey Merano Tower in Business Bay.
Other developers could be just finalising details of their own launches, whether they be brand new projects or updates from their earlier ones. Some of that will be on display at the Cityscape event, which opens September 8.
But will the coming weeks match the level of launch activity that took place in the first-half? According to estimates from Cluttons, projects that would account for more than 40,000 units made it off the developers’ drawing boards during the first six months of the year.
According to Saeed Al Qatami, CEO of Deyaar, “The Dubai market has always seen extreme swings in investor activity brought about by supply and demand factors. This time, those concerns seem magnified because there are external factors such as the international situation, the currency and commodity volatility.
“But developers cannot function purely on cyclical swings — the way we see it Dubai’s fundamentals remain the way they were before the current correction took effect. And those fundamentals are what will have developers launching and buyers committing to be a part of the emirate.”
But there are still ways where developers can time their actions to be in sync with the current market situation. Mat Green, Head of Research and Consultancy at CBRE UAE, “Unlike previous years of Cityscape, we are not expecting to see the launch of multiple master plan projects this year. Rather we anticipate more strategic launches within existing developments.
“With a number of major masterplans still to formally take shape, we expect to see the launch of anchor-style projects, [and] developments which will ultimately help in place making and establishing critical mass.”
But having launches between now and until such time the market turns itself around completely is not for a faint-hearted developer. The number of off-plan units being placed in the secondary market at steep discounts will strain developers’ flexibility in fixing prices for upcoming launches.
For instance, an 873 square feet one-bedroom apartment within the Emirates Living cluster carries an offer of a 15 per cent discount — including the mandatory Oqood charges — on the original price of Dh1.05 million. This is on a property that should be ready for handover by April 2016.
Another two-bedroom unit, also in Emirates Living, comes with a discount of 14 per cent on the original pricing of Dh2.06 million.
According to Sameer Lakhani, Managing Director at Global Capital Partners, an investment firm, “Recent talk on Dubai realty has always centred around the market gaining in maturity. But in a market where the supply of new homes has doubled in 10 years and is set to double again in another decade, the volatility will be amplified.
“Such a supply pipeline will always have a bearing on market forces — both on the upside and the down.”
Cluttons estimates that a further 20,000 plus units could be delivered by the end of 2017. Furthermore, it notes recent off-plan launches are already 10-20 per cent of the ‘prevailing rates for completed properties’, [and] underscores the affordability challenges faced by the domestic market’.
Now, if discounts of anywhere up to 15 per cent are being offered by shaken investors on off-plan values already 10-20 per cent lower than completed units, it does put a developer with new launches in a very hard place.
Why would an investor be keen on a new project in an already established location where discounts are already available on the more recent launches? That is the tightrope developers will have to walk on when setting their prices.
For buyers out there, the dice will continue to roll in their favour. They only need to ask.