Revealing Fresh Opportunities: Exploring Off-Plan or Ready Home Acquisition for Dubai’s Residents in Light of Mortgage Rate Changes.
Embracing the Shift: Dubai Tenants Contemplate Homeownership as Mortgage Rates Stabilize
As the possibility of mortgage rate hikes wanes, an increasing number of Dubai tenants are pondering the transition from renting to owning their own homes. The driving force behind this paradigm shift is the ongoing surge in rental costs, which show no signs of abating. Faced with the prospect of ever-increasing rents, the appeal of investing in a property becomes all the more enticing. Given the current market conditions, tenants may feel encouraged to seize the opportunity and embark on the journey of homeownership in Dubai.
According to a source within a leading development company, “a fresh wave of exorbitant rent demands upon lease renewals will convince residents that they need to seriously consider purchasing a home.” The recent FAB advertisement, which highlights the enjoyment solely reserved for landlords, is expected to resonate with many aspiring homeowners who share this sentiment.
Resurgence in UAE Mortgage Numbers Sparks Tenant Transition to Property Ownership
The year-to-date has witnessed a surge in mortgage numbers in the UAE, indicating a growing trend of tenants venturing into the property market as buyers. Bankers predict a rush of end-user purchases in the second half of 2023. The conversion of tenants into homeowners had slowed down toward the end of 2022 due to mortgage rates and escalating property values. However, developers have recognized the potential and have started offering attractively priced homes with incentives on payment plans and registration fees, successfully enticing buyers back into the market.
For these aspiring homeowners, the off-plan sector in Dubai holds significant allure, accounting for an impressive 60% of recent sales. The launch of Emaar’s colossal $20 billion development, ‘The Oasis,’ spanning 100 million square feet, has invigorated the off-plan market further. Additionally, Abu Dhabi’s Aldar is set to introduce three communities in Dubai, generating high anticipation. Market sources suggest that these communities may offer mid- to upper-midrange pricing, appealing to end-users seeking a favorable position 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 currently occur in the middle range, with most ready homes being purchased at or around the Dh1200 per square foot threshold. This trend persists despite attention-grabbing offers in Dubai’s real estate market, with prices often exceeding Dh10,000 per square foot.
The GCP-Reidin research states that “Palm Jumeirah maintains its incredible dominance” when it comes to villas, contributing significantly to inflated pricing figures for the overall real estate market in Dubai. While there is still room for off-plan developments on the Palm, Nakheel has already commenced construction on the 300-meter-tall, 71-story ‘Como Residences‘ on its main island. The next major sales launch would be the Armani project on the Palm, owned by Sharjah-based Arada.
Off-Plan or Ready-to-Move-In?
Off-plan launches now command higher prices compared to ready homes, leading to a widening price difference. This price dynamic is evident even in Dubai’s mid-market areas. Property Monitor’s May update reveals that the average price per square foot values in new development projects in Tier 2 areas have significantly surpassed the current residential supply in those communities. For example, Arjan, where developers ORO24 and Samana have launched numerous successful projects, has achieved an average of Dh1267 per square foot in 2023, while ready buildings on the market are currently trading at an average of Dh851.
With a plethora of new developments announced in recent months and expectations for more to come, it is likely that the off-plan segment will continue to drive price appreciation at a rapid pace.