by admin
Mortgage Rates Unveil New Possibilities: Off-Plan or Ready Home Purchase for Dubai Residents.
With the era of mortgage rate increases potentially ending, more tenants in Dubai are contemplating the transition from renting to owning their own homes. The prevailing factor driving this shift is the ongoing surge in rental costs, which shows no signs of slowing down. As tenants face the prospect of continually rising rents, the allure of investing in a property becomes increasingly appealing. The current market conditions may encourage tenants to seize the opportunity and embark on the journey of home ownership in Dubai.
According to a source at a top developer, “another round of sharp rent demands when leases are up for renewals will convince residents they need to seriously consider buying a home.” “I believe the recent FAB advertisement, which claims that only landlords are enjoying themselves, will be successful. Many aspiring property purchasers share this sentiment.
UAE Mortgage Numbers Rebound, Driving Tenant Transition to Property Ownership
In the year-to-date, UAE has witnessed a surge in mortgage numbers, indicating a growing trend of tenants venturing into the property market as buyers. Bankers predict an upcoming rush of end-user purchases in the second half of 2023. The conversion of tenants into homeowners slowed down toward the end of 2022 due to mortgage rates and escalating property values. However, developers have recognized the potential of offering attractively priced homes with incentives on payment plans and registration fees, enticing buyers back into the market.
For these aspiring homeowners, the off-plan sector in Dubai holds significant allure, accounting for a remarkable 60% of recent sales. Emaar’s launch of ‘The Oasis,’ a massive $20 billion, 100 million square feet development, has further invigorated the off-plan market. Additionally, Abu Dhabi’s Aldar is set to introduce three communities in Dubai, generating high anticipation. Market sources suggest these communities could offer mid- to upper-midrange pricing, appealing to end-users seeking a sweet spot in the market.
Is the sweet spot’ at Dh1200 per square foot?
According to recent research by GCP-Reidin, the majority of transactions in Dubai are currently “occurring in the middle,” with the majority of the ready homes being purchased at or around the Dh1200 per square foot threshold.
This is taking place despite the fact that Dubai real estate continues to attract a number of attention-grabbing offers, with prices typically exceeding Dh10000 per square foot.
“When it comes to villas, we see that Palm Jumeirah maintains its incredible dominance,” the GCP-Reidin research states. Palm Jumeirah is outperforming enough on its own to inflate pricing figures for the overall real estate market in Dubai.
There is still more to be done at the Palm in terms of off-plan developments; however, Nakheel has already begun construction on the 300-meter-tall, 71-story ‘Como Residences’ on its main island. The Armani project on the Palm, which the company with its headquarters in Sharjah, Arada, possesses, would be the next significant sales launch.
Off-Plan OR Ready-To-Move-In?
Off-plan launches now cost more than what ready homes are selling for, widening the price difference. Even in Dubai’s mid-market areas, this price dynamic is present.
The average price per square foot values in new development projects in Tier 2 areas are recording significant highs in contrast to the community’s current residential supply, according to Property Monitor’s May update. For instance, Arjan, where developers ORO24 and Samana have launched numerous successful projects, attained an average of Dh1267 psf in 2023, while ready buildings that are already on the market are currently trading for an average of Dh851.
Given the unprecedented amount of fresh developments that have been announced in recent months and the expectation of many more during the year. It is possible that the off-plan segment will continue to drive price appreciation at a rapid rate.
The logical course of action for end users would be to look for a place to live in the ready/secondary market. However, it will not be simple because any ready inventory that was offered may already have new purchasers.
They are so left with an unconventional option. They will discover that developers are eager to negotiate agreements. Even if it means having to pay extra, and this will somewhat allay their cost-related worries. The developer may be willing to offer a rent-to-own transition if you want to purchase homes that are almost ready for completion.
Waiting much longer to purchase a home is something that tenants who want to become property owners should not be doing. When the present bullish market cycle will turn is a mystery. It certainly appears like rent increases will not be going away anytime soon as Dubai and the UAE continue to draw in new inhabitants.
