Off-plan: Investing in future of Dubai
Dis a city that has always looked to the future, climbing UBAI impossible heights only to get a better vantage point for the next challenge that can be tackled. Nowhere is this fact more evident than in the city’s real estate market, where the completion of one stunning property is followed by the announcement of another that aims to surpass it on every level. Off-plan properties have always been a popular commodity in Dubai and with newer projects being launched that have the winning blend of exceptional quality, developer pedigree and fantastic location, that particular segment of the market has been performing quite well over the past few years.
Off-plan sales were at an incredible high in 2017, accounting for more than 65 per cent of transactions in the Dubai property market. While the furor around off-plan didn’t quite reach those heights in 2018, I expect there will be a renewed surge of interest as we head towards 2020, particularly with new government initiatives aimed at investors and generous payment plans provided by developers.
But what exactly is ‘off-plan’? By definition, an off-plan property is one that has not yet been built. You make a purchase decision on the property based only off the plans that have been drawn up for it. In a broader sense, we consider any property to be off-plan if it is still under construction and in some cases, up to the point that residents actually start moving in.
The most common question that tends to come up after that is, why would you want to purchase off-plan? The simple and somewhat poetic answer would be that you are investing in the future of Dubai. This city has, in a short time, accomplished what would normally take decades to achieve. Consider cities such as
London and New York, with centuries of history behind them. By comparison, Dubai as we know it has been around for less than fifty years and already stands shoulder to shoulder with these global giants. As the city continues to grow, investment into that growth will create a positive cycle that ultimately benefits everyone.
Over a decade or so, we have seen the landscape of Dubai shift dramatically, with the introduction of several man-made islands and intricately planned out master communities. These projects, many of which are being helmed by noted developers such as Emaar and Meraas, promise a community environment and a quality of life that is incomparable to anything that is currently on the Dubai market, save for a few select established areas. We have recently seen the announcement of stunning waterfront communities such as Dubai Harbour, Creek Beach and Port de La Mer, along with very exclusive products such as Madinat Jumeirah Living and The Exclusive 9, with the latter two enjoying a very prime location near the iconic Burj Al Arab.
These projects are ideally suited for investors with a long-term outlook. Generally, a newly announced project has a construction cycle of 4 to 5 years. Purchasing an off-plan property towards the beginning of that cycle gives you a sizeable window to watch that investment appreciate as the property continues to develop and the infrastructure surrounding it is put into place. As the project nears completion, however, it starts to attract more interest from home end users who might be looking to move into a new home in the near future.
With 5- and 10-year investor visas going into effect and the implementation of retiree visas (that require a minimum investment of Dh2 million), there will undoubtedly be an uptick in the number of international investors buying into the Dubai market. In fact, my brokerage team has already several inquiries about obtaining long-term residence visas, so the future is looking quite bright on that front.
That being said, we cannot ignore the fact that off-plan does have a fair amount of risk associated with it. You are effectively buying into something that does not yet exist, and there are myriad factors that could go wrong. The project could get stuck in limbo, or there might be a depreciation in its value over time due to a change in market conditions. But then, the same could be said of any investment. The Dubai government is also very aware of that and is constantly refining measures to mitigate those risks for all parties involved.
The fundamentals of the Dubai market are still very strong and the city has a phenomenal vision for 2020 and beyond. This is, I think, an excellent time to consider off-plan though of course, I would always recommend getting trusted professional advice before making any property buying decision.
With 5- and 10-year investor visas going into effect and the implementation of retiree visas, there will undoubtedly be an uptick in the number of international investors buying into the Dubai market
The writer is founder and CEO of LuxuryProperty.com. Views expressed are his own and do not reflect the newspaper’s policy.