Dubai real estate market booms: New projects gain momentum as new buyers flock in
Off-plan sales have reached the highest market share since the beginning of Covid-19
New project launches in Dubai are going strong as developers are increasingly looking to tap new buyers – both residents and foreigners. These new launches are coming up not just from the local property developers but also international developers foraying into the local market as Dubai strengthens its position as a mature and stable market with steady and high returns.
Investors are snapping up the newly launched units as off-plan sales, according to Property Monitor, reached the highest market share since the beginning of the Covid-19 pandemic. The total volume of sales transactions also increased 8.1 per cent month-on-month, reaching a total of 12,134 sales and marking the highest volume ever for the month of August.
There have been 85,060 sales transactions recorded to date, a 41.9 per cent increase over the same period last year and a 125.4 per cent increase of that for 2021. Average monthly transaction volumes for 2023 are far exceeding any previously recorded figures, setting the market on track to outperform the highest-ever annual sales record established in 2009. All these strong figures are encouraging developers to launch new projects as demand for the foreseeable future looks promising and most of the developers are successfully selling out their projects within months. In fact, some developers claim to have sold around 30 per cent of their units even before the launch of the project.
It’s not just individual developers that are cashing in on the bonanza but big developers have also announced new mega-developments in the past few quarters as the short to medium-term outlook for the local real estate market looks pretty strong.
Industry players project that the Palm Jumeirah itself will see projects worth billions of dirhams to be launched. Among other major developers, the UAE’s largest developer Emaar Properties launched a massive $20 billion The Oasis by Emaar in June.
The Oasis covers a total land area of more than 100 million square feet. It will house over 7,000 residential units focusing on large mansions and villas with spacious plots, providing residents with views of water canals, lakes, and parks.
Danube Properties alone has launched its fifth project so far this year with the latest Oceanz going on sale now after successfully selling the previous projects. Oceanz is the largest project launched by the developer to date. Interestingly, it has launched 10 projects in the last 19 months alone.
Another private firm Samana Developers has launched a number of projects and has a target to launch 12 projects by the end of 2023.
“The new investment trend which is also contributing to the high demand of Dubai real estate is the depreciation of the US dollar – 3.3 per cent in H1 2023 – which has made it more affordable for buyers from European countries whose currencies have gained value against the dollar”, says Imran Farooq, chief executive officer, Samana Developers.
Azizi Developments, another major private developer in Dubai, will also launch a Venetian-inspired waterfront project in Dubai South. The leading developer is also building the UAE’s second-tallest tower on Sheikh Zayed Road.
There have been a number of new international entrants also into the market who are launching projects.
Mered, an international real estate developer, has announced its official launch in the UAE, choosing Dubai to be its home for designing and developing exclusive destinations. Similarly, Britain’s LEOs Development and Switzerland’s Fortimo have also forayed into the UAE market over the past year.
Fintan Flannelly, head of developer sales at Allsopp & Allsopp, said the entry of international developers was increasing the supply in the property market.
“These developers, both new and established, are not only executing projects locally but are also marketing to potential buyers outside of Dubai, capitalising on the high demand for property investment in the region,” added Flannelly.
He attributed to various factors, namely the surge in innovative off-plan solutions with flexible payment plans making property purchases more accessible, heightened confidence in Dubai’s off-plan projects due to the consistent project delivery in line with the Dubai Government’s robust legislations, and the emergence of branded residences adding a touch of luxury and desirability.
Lewis Allsopp, CEO of Allsopp & Allsopp Group says the city’s development pace is yet to match its constant demand. “The past year alone saw an influx of nearly 100,000 residents. To sustain this growth rate, an additional 33,000 homes would have to be in the books in the last quarter of 2023. While Dubai’s commitment to development has been apparent with numerous announcements this year, the typical three-year handover period underscores the urgency to expedite projects, especially in high-demand areas like Business Bay and Jumeirah Village Circle for example,” adds Allsopp chief executive.
Off-plans see massive demand
The strong demand for off-plan projects reflects that mainly investors are buying the new units. Developers claim that residents are also a good number of buyers of the off-plan units, who want to buy their own homes amidst rising rentals.
New development project launches and the sale of off-plan properties have been significant drivers for the amplitude of transaction activity this year. In August, a total of 7,085 off-plan Oqood transactions were registered, increasing by a remarkable 35 per cent month-on-month and 60.6 per cent on a yearly basis, according to Property Moniotor.
Oqood, meaning ‘contracts’ in Arabic, is to register all types of contracts between off-plan property developers and buyers.
“Speculative activity is slowly making up a greater portion of off-plan re-sales, however, most of these resales remain skewed towards properties that are within a year of anticipated completion. The restraint currently being witnessed in the market will likely not last, and inevitably a growing number of investors will roll the dice on what may seem like easy short-term gains,” says Zhann Jochinke, director of marketing intelligence and research at Cavendish Maxwell, which released Property Monitor.
However, he adds, this strategy should always be assessed with a high degree of caution and understanding of the risks involved. “Bull markets do not run forever and flipping off-plan can be a dangerous game of hot potato,” said Jochinke.
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