Dubai is renowned for its exceptional real estate offerings, and it continues to outdo itself with award-winning projects being unveiled year after year. The real estate sector plays a crucial role in Dubai's growing economy, and it continues to attract domestic buyers, expats, and foreign investors. Off-plan has been a key segment of the market and has become increasingly popular over the past couple of years.
Off-plan properties are units sold directly by developers to investors and end-users before completion. In Dubai, new projects are selling out within hours of their release, underscoring the growing demand for off-plan properties. The trend is being driven by several factors, including positive sentiments for long-term investment opportunities following various governmental reforms and initiatives.
After a brief pandemic-induced slump that continued into 2021, the off-plan market has definitively bounced back, accounting for over 55% of all transactions in 2022. Below we take a closer look at some of the factors driving the performance of the off-plan property market in Dubai.
Undersupply is Changing Buyers’ Perspective
There is a shortage of supply across all levels of the market, and particularly in the prime and super prime sector. Even the new supply being released in 2023 will be unable to meet buyer demand. Additionally, buyers who were once looking at areas affordable to the lower end of the prime market, are finding themselves priced out of areas such as Palm Jumeirah, Jumeirah Golf Estates, and Dubai Hills Estate. Under these circumstances, buyers are now taking a longer term view for property purchases. With off-plan offerings providing the same high levels of quality at a more attractive price point, it makes more sense to book a guaranteed unit at a lower price now and wait a few years for handover.
Dubai’s Population Growth Fuels Real Estate Demand
Dubai's real estate market is currently experiencing a remarkable surge, thanks to the influx of international investors and high-net-worth-individuals (HNWIs) – who are drawn to the city's impressive economic benefits and potential growth within the off-plan market. The city has witnessed considerable growth in population, leading to an increased demand for homes, but it is not just residents and tenants who are investing in prime real estate. In fact, Dubai has recently witnessed an impressive 18% increase in the number of multimillionaire residents in 2022 alone.
This trend has particularly impacted the luxury segment, which has experienced phenomenal growth over the past year. The number of prime and super prime transactions now accounts for more than 5.65% of all transactions, with the number of transactions increasing by an incredible 171.16%. The current state of Dubai's real estate market presents a lucrative opportunity for investors looking to actively participate in a thriving market, and HNWIs looking to own a piece of prime real estate in one of the world's most sought-after locations.
Waterfront Properties at the Top of the List for Investors
In Dubai, waterfront and beachfront properties have always been hugely popular. The surge in property values caused by undersupply in the real estate market is especially noticeable when looking at waterfront projects. Investors in those projects bought up units before prices went up and as a result, the resale market is now extremely active, with buyers willing to pay substantial premiums to acquire a unit. For instance, in Emaar Beachfront, resale prices are fetching an average premium of 57.47% above the original developer selling prices. Some of the most prominent projects in 2022 were Creek Beach in Dubai Creek Harbour and Address Residences The Bay in Emaar Beachfront. In 2023, we have already witnessed the launch of several new high-end projects, including Lanai Islands in Tilal Al Ghaf, Bluewaters Bay, and Luce on Palm Jumeirah, all of which are surpassing expectations in terms of sales and interest.
Waterfront projects continue to be at the forefront for buyers who are looking to invest in prime real estate, and others who want to experience an all-inclusive lifestyle in one of the fastest growing cities in the world with no income tax and sunshine all year round.
If we look at master communities such as Mohammed Bin Rashid City, Dubai Creek Harbour, and Emaar Beachfront, these were some of the most in demand areas for off-plan and resale transactions. Despite high levels of anticipation, the demand for properties in these communities far outweighed the supply, leading to rapid sell-out of individual projects within these communities.
These projects offer a fusion of contemporary design and an exclusive waterfront lifestyle, with an impressive collection of new, world-class units, boasting modern architectural elements, and exquisite craftsmanship, setting a new benchmark for upscale urban living in Dubai.
Buyers’ Protection Laws
In contrast to the sale of fully-constructed properties, the Dubai property market has implemented a number of regulations to safeguard the interests of off-plan property buyers. Both the Dubai Land Department (DLD) and the Real Estate Regulatory Authority (RERA) are fully committed to preventing cancellations, delays, and fraudulent activities associated with off-plan properties.
Legislation requires that developers can only access funds that have been booked once the project has reached a specific stage of completion. Additionally, recent law mandates that developers must guarantee 20% of the building cost. These measures provide buyers with a sense of security and assurance, encouraging them to invest in off-plan properties with complete confidence.
The off-plan market in Dubai delivered a stellar performance in 2022 and shows no signs of slowing down any time soon. Investors continue to recognize the potential for solid financial gains, while end-users can take advantage of the value for money when purchasing a new home.
Dubai's thriving off-plan market is a testament to the emirate's robust real estate sector, making Dubai's properties one of the most preferred investment assets for the long term. With the growing population and increasing investor interest, off-plan properties are poised to remain a popular choice for buyers looking to invest in the city's real estate. With this in mind, we can expect that both transaction volume and property value will continue to increase throughout 2023.
However, as with any investment opportunity, there are two sides to the off-plan property market. By highlighting the potential benefits, we aim to provide you with a comprehensive understanding of the facts and advantages that this market has to offer. Whether you are an investor seeking profitable opportunities or a homebuyer looking for affordability and value, the off-plan market in Dubai offers a wealth of benefits and options that will be hard to ignore.
If you wish to have a more in-depth understanding of the Dubai off-plan market and its premium offerings, reach out to our Private Client Advisory team for impartial advice and guidance.