Revealing New Homeownership Opportunities: Mortgage Rates Present Choices for Dubai Residents Looking to Purchase Off-Plan or Ready Homes.
As mortgage rates show signs of stabilization, Dubai residents are exploring the possibilities of transitioning from renting to owning their own properties. The driving force behind this shift is the continuous surge in rental prices, which shows no signs of abating. With tenants facing the prospect of escalating rents, the idea of investing in a property becomes increasingly attractive. The current market conditions are likely to motivate tenants to seize the moment and embark on the path of homeownership in Dubai.
A prominent developer source stated, “The imminent wave of substantial rent hikes during lease renewals will convince residents to seriously consider purchasing a home.” They further expressed optimism that the recent FAB advertisement, highlighting the enjoyment of homeownership compared to renting, will resonate with many prospective property buyers who share the sentiment.
Revitalized UAE Mortgage Market Spurs Tenants to Embrace Property Ownership
Throughout the year, the UAE has experienced a notable upswing in mortgage numbers, signaling a growing trend of tenants transitioning into property ownership. Bankers foresee a surge in end-user purchases during the second half of 2023. Toward the end of 2022, the conversion of tenants into homeowners had slowed due to rising mortgage rates and escalating property values. However, developers have recognized the potential and are now offering attractively priced homes with incentives on payment plans and registration fees, effectively luring buyers back into the market.
For aspiring homeowners, the off-plan sector in Dubai holds great appeal, accounting for a remarkable 60% of recent sales. The recent launch of ‘The Oasis’ by Emaar, a massive $20 billion development spanning 100 million square feet, has injected further vitality into the off-plan market. Additionally, Aldar in Abu Dhabi is poised to introduce three communities in Dubai, generating high levels of anticipation. Market sources suggest that these communities may offer mid- to upper-midrange pricing, making them particularly attractive to end-users seeking a favorable position in the market.
Is Dh1200 Per Square Foot the Ideal Price Point?
Majority of Dubai Transactions Occur at Dh1200 per Square Foot, Reveals GCP-Reidin Research
Recent research conducted by GCP-Reidin highlights that the majority of real estate transactions in Dubai are currently concentrated around the Dh1200 per square foot range. Despite the presence of attention-grabbing offers with prices exceeding Dh10,000 per square foot, buyers are gravitating towards properties in the middle price range.
The dominance of Palm Jumeirah in the villa segment is a key factor contributing to the overall pricing trends in Dubai’s real estate market. The allure of Palm Jumeirah is strong enough to influence pricing figures across the city.
While there are ongoing off-plan developments on Palm Jumeirah, Nakheel has already commenced construction on the impressive 71-story ‘Como Residences,’ standing at 300 meters tall on the main island. Additionally, the upcoming sales launch of the Armani project by Arada, a company headquartered in Sharjah, will further shape the market dynamics on the Palm.
Off-Plan OR Ready-To-Move-In?
Price Gap Widens as Off-Plan Launches Surpass Ready Homes in Dubai
The price disparity between off-plan launches and ready homes in Dubai continues to grow, even in the mid-market segments. According to Property Monitor’s May update, new development projects in Tier 2 areas are commanding significantly higher average price per square foot values compared to the existing residential supply in those communities. For example, Arjan, where ORO24 and Samana have launched successful projects, recorded an average of Dh1267 per square foot in 2023, while ready buildings in the market are currently trading at an average of Dh851.
With the influx of new development announcements and more expected throughout the year, the off-plan segment is likely to continue driving rapid price appreciation. This poses a challenge for end users seeking ready/secondary market options as existing inventory may already have new buyers.
However, there is an alternative path for buyers. Developers are showing willingness to negotiate agreements, even if it means paying a premium, to address cost-related concerns. In some cases, developers may offer rent-to-own transitions for homes that are nearing completion.
Tenants aspiring to become property owners should not delay their home purchase. The timing of the market cycle remains uncertain, and with the persistent demand and population growth in Dubai and the UAE, rent increases are expected to persist.