New off-plan launches in Dubai enter slow phase
PRIVATE DEVELOPERS’ SHARE OF NEW RELEASES THIS YEAR HAS DROPPED
Private developers in Dubai have hit the brake on new launches, hoping that this way they would be able to stave off some of the oversupply concerns in the property market. In the first nine months, these developers launched a combined 2,314 new units, which represents just 26 per cent of the overall releases done this year.
That compares with their share of 64 per cent for the same period last year, when they released 14,043 units out of 21,321 launched between January to end August. The comparisons with 2017 are even more stark — private developers had a 74 per cent share of launches. And in 2016, it peaked at 81 per cent, according to date supplied by Reidin-GCP.
So, what’s bringing this about? The answer lies in the number of new homes being delivered in Dubai. “The Dubai property market could see a record number of completions by year-end,” said Sameer Lakhani, Managing Director at Global Capital Partners. “If more than a quarter of these completed homes don’t have a buyer by then, it could build up the demand-supply mismatch.”
Looming worry
In the year to August 14,999 new homes have been completed, with private players making up 85 per cent — 12,788 units — of these. In fact, in each of the last two years, the private players have had a hand in more than 80 per cent of the deliveries. In 2016, their share dipped to 71 per cent, but that was after a whopping 92 per cent share in 2015, ReidinGCP numbers show.
Over the last two years, more than 57,000 homes were added to Dubai’s existing base. So, what could be the final year’s ■ Number of homes completed till August 14 this year tally? Most market watchers are putting their money at around the 30,000 mark, insisting that it is unlikely that the total would shoot up anywhere over 45,000-50,000 units.
There is no clear data on the number of delivered units that are still unsold from the last three years. But there will be one detail that will worry developers of all sizes — as per UAE laws, VAT (value added tax) will come into effect on all unsold property of three years and older left with a developer. (Currently, all residential property sales are rated at 0 per cent.)
As private developers Private developers’ share in total launches this year brought down their launches, government-owned ones have kept the supply pipeline flowing smoothly. Emaar, Meraas and Dubai Holding have all managed to tap into buyer interest, with launches such as Emaar Beachfront (in Jumeirah), Cherrywoods (on Al Qudra Road), and Madinat Jumeirah Living (near the Burj Al Arab and other Dubai icons) being the biggest beneficiaries. (Dubai Holding definitely set the bar high on endorsements, signing up Cristiano Ronaldo, to put some serious celebrity heat into its commercials.)
“The only way private developers can compete with government-owned ones seems Homes added to Dubai’s base over the past two years to be through post-handover plans,” said Lakhani. “But with government developers offering their own post-handover schemes, it’s a tough fight out there.
“Whether ready or off-plan, where post-handover plans exist, the offtake has been high as evidenced at Jumeirah Village Circle. The problem, however, is that the vast majority of private developers have not been able to compete effectively — hence the reduced number of launches.
“From a buyer’s perspective, it’s even cheaper cash flow-wise to buy an apartment rather than a car, based on the monthly outgo for each.”
Azizi Developments has launched off-plan sales at its new tower in Dubai Healthcare City, thus becoming the first developer to do so after the Dubai Government set up a committee to look into demand and oversupply issues.
But despite the launch, a top official at Azizi said the Dubai property market is in dire need for controls. “There has to be some in place to regulate supply — not all developers can come in, build and then expect to sell,” said Farhad Azizi, CEO. “If developers keep doing that, it will dilute the market. That’s dangerous.”
The bigger risk for market stability is when “developers keep adding more projects at the same location — particularly those locations where there is no demand,” the CEO added. “There are such locations in Dubai, and all developers, irrespective of size, need to be careful.”
It was earlier this month that Dubai set up a Higher Committee that would look into all aspects related to development and market needs for the next 10 years. Topping the agenda, however, will be to find ways to bring down drastically the chances of a flood of new homes being built with no buyers for them.
Wait-and-watch attitude
The market is already taking a wait-and-watch attitude on what steps the Committee could take to tone down concerns. Azizi says that’s why the Committee’s formation could not have been delayed any longer. “The market has not been performing anywhere near wonderful; even 2018 was not good and sales during August did not go well for anyone,” he added.
For the latest project, the Creek Views, the developer SCAN ME
came out with a new strategy. Sales had actually opened last year, but then was stopped one month later.
“We had another project next to the site, the Aliyah, which we wanted to finish first and handover,” he said.
“This was done last month — we have a near 100 per cent sell-out on this. It meant there was demand for the location — DHCC — and that’s why the Creek Views’ sales are being relaunched from today.
“It goes back to what I said before — be sure about demand for the location/area and then launch. Any uncertainty, it’s best not to at this time.”
Creek Views, scheduled for completion late next year, is 24 per cent built up. Prices for a studio start from Dh522,000 for a studio, a decent markup from the sub Dh500,000 for a similar unit at the Aliyah. There are 634 units in all, across formats.
“The payments will be split 50:50 — I don’t believe in the crazy post handover payment plans that are freely available in this market now.”