Buying off-plan property in Dubai is usually more affordable than purchasing already built apartments and houses. However, while the lower price of a property that doesn’t yet exist is certainly attractive, it also hides a number of risks, which should be wisely considered before signing a Sales and Purchase Agreement. In order to make the right decision, you should know about the pros and cons of buying off-plan property in Dubai.
The concept of buying off-plan is to buy at current prices and once the development is completed, your investment will be worth more. This is usually how it works and therefore, when well-established property developers launch new projects in Dubai, investors are lining up with their checkbooks ready. There are plenty of opportunities in UAE since new developments are being announced nearly every week. In addition, many off-plan properties or even some near completion are listed for resale.
Price – Normally, purchasing a property under construction is more affordable than purchasing a ready-to-move-in home. This is the greatest benefit of the off-plan home buying concept – after all, for the majority of people, the price is the most important aspect of the deal.
Appreciation – If you manage to assess right the potential of an off-plan property, its value after completion can appreciate at least by 20% or even more. At present, the residential market is active as many developers have reduced their prices. Home prices are expected to increase by 2020 when UAE will host Expo 2020 Dubai.
Logically, if you buy a home under development right now, by 2020 its price may climb up to 50% (or even more). If you decide to sell it, you will be able to make a considerable profit.
Payment plans – Developers in Dubai are offering very attractive payment plans, including really small amounts as deposits. Now you can easily find a property, which requires only 10% of the price as a down payment. Then, you will have to pay the rest in installments until the completion, which can be after two or three years. There are even a few projects offering payment scheme that allow investors to complete the payments during the two years after completion and handover.
These relaxed conditions are coming in a time when new mortgage rules are already effective across the UAE. It’s getting harder to get a loan due to the new requirements and loan caps, so developers’ offers for purchasing off-plan sound good. Still, if you possess a good knowledge of the real estate market, you can find a lender who will process your application in a week and offer you an interest rate of 3.85% or similar.
Price (Again) – Typically, when buying something that exists only on the developers brochures and lenders documents, you would expect it to be cheaper. This was the case in Dubai as well, but only until recently. Off-plan properties were usually priced around 20% less than existing homes. However, according to industry experts, this gap is narrowing down. Now, developers consider their off-plan or under construction homes with flexible payment plans just as attractive as ready homes, so they rarely offer bargains.
Risk – The biggest risk for many people in this type of deals remain the fact that they may never see their property completed. This usually happens when developers face financial troubles and put the projects on hold. Of course, there is also the risk of falling a victim to real estate fraud. However, if you review the S&P contract you are about to sign and get legal advice beforehand, you are relatively safe to go. In addition, government-backed and publicly traded large developers are considered reliable.
Property experts are warning that the increased sales of off-plan homes threaten to fuel another property bubble. The attractive payment plans offered by developers are favorable to speculators. Industry experts say also that the market is now in stable condition and it will remain very active to investors in the coming years.
Dubai is enjoying strong economic growth and the population of expat workers is increasing. Overall, most of the economic predictions are positive, so buying a home in UAE, especially off-plan may turn out a lucrative investment opportunity.
Dubai, in particular, is a popular travel destination with a well-developed business environment and infrastructure. Buying off-plan property will make you a winner if you manage to stay long enough.