The maturity of the Dubai real estate market seems to be borne out by recent evidence that residential and commercial prices have softened but not crashed. But while the market may not be booming, its resilience still makes it an attractive proposition for investors as it is still underpinned by sound legal safeguards.
There has been a slight hiatus in the announcement of new developments to the market, and this means that there is high demand for those projects that are coming on line in the lead up to Expo 2020.
Patience will be key though for off-plan investors who of course will not see income from their purchases until units are handed over in three or more years from now. This is a long lead time to realise value, and in the Dubai market there are factors that also serve to encourage a lively secondary market for off-plan sales.
Firstly, the natural turnover of residents in the Dubai market means that during the protracted development period there will always be some buy-to-live purchasers whose work takes them away from the UAE. This has been quite common recently with the downturn in the oil and gas sector regionally. When work obliges a buyer to leave the UAE, disposal of off-plan properties becomes more attractive.
Similarly we have seen some buyers of a more cautious disposition, or those who perhaps overcommitted themselves financially, seek to withdraw from off plan purchases that they have already entered into over the past couple of years.
Perhaps most surprisingly for some is the readiness of developers to agree to such terminations – precisely because live developments are at a premium and remain desirable in the secondary market. The overall restriction in supply means that there are waiting lists for most developments.
Unlike in previous years though, the existence of the escrow account system under which deposits are held in safe, regulated accounts means that deposit monies not yet applied to construction will be protected and available. This of course will still subject to the rights of the developer to make deductions at defined rates dependent on the state of progress of the project..
Even in the secondary market off-plan buyers will need to be aware that they are still liable to pay to the Dubai Land Department a further registration fee of 4% of the resale value of the off-plan property.
- The writer is Partner, Holman Fenwick Willan Middle East
