Competition benefits buyers: Dubai Real Estate Developers Revising Prices and Payment Plans to gain market share

May 16 2015
By Lookup.Ae Sales

According to research done by Lookup.ae, there were at least 60 new project launches that took place in 2014 and another 24 in 2015. While we cover almost all freehold projects in Dubai, there may be a few that haven’t been taken into account. However, for the large part we can easily estimate that since 2014, at least 80 – 100 real estate projects have been announced in freehold Dubai. Before reviewing some strategies developers are undertaking, let’s review the overall market picture in brief

A quick overview of Real Estate Market Conditions

The market started ‘slowing down’ in mid-2014. Since Q2 of 2014, we have witnessed prices in most ready communities declined by between 3 - 10% on average over the last 12 months. The Government has encouraged a slow-down by increasing transfer fees and making it more expensive to get a mortgage. If we look at prices today, they are at the same level they were as when the Expo 2020 was awarded to Dubai in November 2013. Prices for the most part are stable, but we are still seeing a slight correction for ready properties.
The market has corrected and stabilized because most of Dubai’s communities have entered a mature period. For the most part, they are occupied by end-users who have purchased in the thousands in between 2011 - 2014. Occupancy rates across Dubai freehold average between 90 - 95%.
In addition, the small & medium investors have exited the ready property market. What we saw happening a lot in 2011 – 2013, was investors buying under-value property or buying in bulk in off-plan projects and then flipping at a profit. This propelled the market upwards. For the most part, this type of activity has ceased to exist.

Developments launched in 2014

To launch a project in Dubai, the planning commences between 6 – 18 months in advance of a public launch. So what we saw in 2014 that even though the market had slowed, Developers were already in advanced stages of launching their developments. Most of them went ahead and launched when market conditions were not favorable.
This is not to say that they were unable to sell. In Dubai the mindset has become such that if a project does not sell out within the first 24 hours, it is sometimes deemed as unsuccessful. While major developers like Emaar can seemingly sell out a project at will, other developers are and should be content to sell out their stock over a period of months as is common everywhere else in the world.
So while many developments sold out anywhere between 20 – 50% of their stock, they continue to hold inventory.

…and new more projects continue to launch

The perception amongst the common observer is that there are way too many projects being launched and that Dubai is headed for over-supply. Now, this may be true to an extent. Research done by Lookup.ae indicates that there are now approximately fourteen thousand villas & townhouses as well as thirty-four thousand apartments that are under-construction in freehold Dubai, which equates to approximately 30% of current supply.
But there are other ways to look at the new supply. For the most part, an over-supply is a positive for this market. Research done by numerous firms indicate that spending on housing in Dubai typically equates to between 20 – 40% of take home pay. For this Emirate to be competitive over the long-term, the cost of housing has to decrease. If Dubai is to meet its true potential, there must be a balance reached which gives different income brackets the chance for a better quality of living.
The new supply will bring down rental costs and also open up home-ownership to thousands of people who have been priced out of the market.
On the other hand, buyers looking for incredible amounts of capital appreciation previously witnessed in 2007 – 2008 and 2012 & 2013 will most likely not experience such growth rates again.

And so Developers are repositioning their product offering

Dubai is now seeing developers competing with one another in a way they never had to before. Those developers that recognize the changing market dynamics are able to gain a competitive edge.
Developers are revising prices downwards and in an interesting turn of events, many new projects are now offering payment plans which extend to upto 3 years after completion - a concept which was pretty much unheard of a few years ago.

Snapshot Case Studies

Al Khail Heights

Al Khail Heights was one of the first projects to take advantage of changing market dynamics and it paid off in a big way. About 3,000 apartments of mid-end quality launched in late 2013 in an industrial area but close to Business Bay & Downtown Burj Dubai. The developer offered a payment plan of 60% payable till completion and 40% payable over 2 years following handover. The project sold out rapidly and set the way for other developers to look into altering their payment plans to attract investors.

Glitz and Dreamz by Danube

This developer did a great job. Danube  an established conglomerate with a very successful home building supplies business, Danube entered the real estate market as a developer for the first time in 2014 by launching Dreamz in Al Furjan which consisted of 3 & 4 bedroom townhouses. The developer conducted what was probably the most intensive marketing campaign seen in Dubai since 2009 and offered value in terms of both price and payment plan (35% of the price was payable upon completion).
With its second project, Glitz in Dubai Studio City, the developer introduced probably the most innovative payment-plan yet seen. Pay 10% down, 15% after 60 days and then 1% a month for 75 months (with delivery in month 36). This project sold out in a tough market conditions and based on that brand’s success, the developer is soon to launch Glitz 3.

NSHAMA’s Town Square

A mega project launched in April 2015 that will eventually contain 18,000 apartments and 3,000 townhouses. The developer has launched a new phase of the project nearly every week for the past two months. Prices for 3 bedroom townhouses started at AED 1.0 million and studios for as low as AED 350,000.
While this project is a good example of how a developer with obviously the right people behind it can launch a project on a mass scale and deliver affordability, it is also an example of mistakes that can be borne of hubris.
Buyers for this project have been frustrated with limited availability at each launch, and also the fact that prices advertised are rarely available. Many buyers turn up to the launches with the intent of buying studio and 1 bedrooms at incredibly low prices only to find out that only about 10 or 20 units were available in the first place.
While the townhouses faired quite well, the apartments are amongst the smallest in Dubai and in terms of price per sq. ft., are actually higher than many other competing developments. NSHAMA had a chance to capture a huge part of the market by meeting economies of scale and delivering true value – many independent observers feel that this chance may have been lost.
Still, every launch NSHAMA have done has led to 100% sales success indicating that the demand is there for lower priced properties. 

GGICO Projects in Dubai Sports City and Dubai Silicon Oasis

GGICO are an established brand, having developed a number of projects across Dubai over many years. To compete in this market, they are continuously launching projects with exceptional payment plans such as 30% payable till completion and then 70% of the price payable over 3 years following handover.

Royal Estates, Dubai Investment Park

Here’s an example of a developer changing gears. The project was launched in 2014 with a huge marketing campaign and with Shahrukh Khan as a brand ambassador. Soon after launch it was obvious that they were struggling to sell and so in 2015, they reduced prices drastically by and came out with a very flexible payment plan: 10% down, 1.2% x 36 months, 20% on handover and then 1.2% x 18 months.

Arabella, Mudon

With Town Square by NSHAMA right across the road, Dubai Properties Group are taking advantage of their strengths (a better location, a community which is already emerging as parts of it are delivered) and then combined that with good pricing and an excellent payment plan.
Arabella is launching on May 17th with a payment plan of 10% down, 4 installments of 5% every six months and then 70% payable upon completion.

Deyaar Projects

In May 2015, Deyaar announced a one day sales event to be held on 16th May which will allow buyers to purchase ready property within the Deyaar portfolio in IMPZ, Business Bay and Dubai Silicon Oasis on a 5% down-payment, and installment plans for 5 years and no maintenance fees payable for 2 years. Deyaar will also pay the full 4% Title Registration fees on behalf of its buyers. Properties will be handed over after 30% payment is made.

 

Projects Launched in Dubai Since 2014

Major Projects Launched in 2015

Project Name Master Community Developer Type Quality
Acacia at Park Heights Dubai Hills Emaar Apartments High-end
Al Andalus Jumeirah Golf Estates JGE Townhouses, Apartments High-end
Al Barari The Nest Al Barari Al Barari Villas Luxury
Arabella Mudon Phase II Dubai Properties Townhouses High-end
Azalea Arabian Ranches Phase II Arabian Ranches Villas High-end
Binghatti Apartments Dubai Silicon Oasis Binghatti Developers Apartments Mid-end
Cayan Cantara Dubiotech Cayan Apartments High-end
Downtown Views Downtown Burj Dubai Emaar Apartments High-end
Glitz 3 Dubai Studio City Danube Apartments Mid-end
Golf Panorama at Akoya Akoya Damac Properties Apartments High-end
Maple at Dubai Hills Dubai Hills Emaar Townhouses High-end
Mon Reve Business Bay Credo Investments Apartments High-end
Nova Hotel Villas Akoya Oxygen Damac Properties Villas High-end
Reef Residence Jumeirah Village Circle Reef Real Estate Investments Apartments Mid-end
Serenia Residence Palm Jumeirah Palma Holding Apartments Luxury
Stella Maris Dubai Marina Bloom Properties Apartments High-end
Town Square Townhouses - NSHAMA Townhouses Mid-end
Town Square Apartments - NSHAMA Apartments Mid-end
Topaz 3 Dubai Silicon Oasis GGICO Apartments Mid-end

Major Projects Launched in 2014

Project Name Master Community Developer Type Quality
7th Heaven Al Barari Al Barari Apartments Luxury
Aces Chateau Jumeirah Village Circle Aces Holding Apartments Mid-end
Akoya Oxygen - Damac Properties Townhouses Mid-end
Al Manara Tower Jumeirah Village Circle Tiger Properties Apartments Mid-end
Ashjar Al Barari Al Barari Apartments Luxury
Azizi Feirouz Al Furjan Azizi Apartments Mid-end
Azizi Liatrus Al Furjan Azizi Apartments Mid-end
Azizi Orchid Al Furjan Azizi Apartments Mid-end
Azizi Yasamine Al Furjan Azizi Apartments Mid-end
Bay's Edge Business Bay Damac Properties Hotel Serviced Apartments  
Capital Bay Tower C Business Bay Damac Properties Hotel Serviced Apartments  
BLVD Heights Downtown Burj Dubai Emaar Apartments High-end
Boulevard Crescent Downtown Burj Dubai Emaar Apartments High-end
Boulevard Point Downtown Burj Dubai Emaar Apartments High-end
Constella Jumeirah Village Circle Damac Properties Hotel Serviced Apartments  
District 11 Mohammad bin Rashid City Meydan Villas, Townhouses High-end
Dreamz Al Furjan Danube Townhouses High-end
Dubai Creek Residence The Lagoons Emaar Luxury High-end
Elite 10 Dubai Sports City Triplanet Apartments Mid-end
Elite 8 Dubai Sports City Triplanet Apartments Mid-end
Elite 9 Dubai Sports City Triplanet Apartments Mid-end
Fortuna Village Dubai Sports City Dubai Sports City Townhouses High-end
Elite Residence Downtown Downtown Burj Dubai Triplanet Apartments High-end
Glitz Dubai Studio City Danube Apartments Mid-end
Golf Horizon at Akoya Akoya Damac Properties Apartments High-end
Hameni Tower Jumeirah Village Circle ZayaHameni Apartments High-end
Lila Arabian Ranches Phase II Emaar Villas High-end
Living Legends - Tanmiyat Apartments Mid-end
Maram Residences Dubai Culture Village Dubai Properties Apartments High-end
Marina Gate Dubai Marina Select Group Apartments High-end
Millenium Square Mohammad bin Rashid City G&Co. Villas High-end
Mira Oasis 1 Reem Emaar Townhouses Mid-end
Mira Oasis 2 Reem Emaar Townhouses Mid-end
Mirdiff Tulip Mirdiff Jersey Properties LLC Apartments Mid-end
Monte Carlo Residence Jumeirah Village Circle Portofino Apartments Mid-end
Montrose Dubiotech Deyaar Apartments High-end
Mudon Phase II - Dubai Properties Townhouses, Villas High-end
Opera Grand Downtown Burj Dubai Emaar Apartments Luxury
Park Villas Jumeirah Village Circle Park International Investments Townhouses Mid-end
Rasha Arabian Ranches Phase II Emaar Villas High-end
Redwood Park Jumeirah Golf Estates JGE Townhouses High-end
Royal Estates Dubai Investment Park Aristocrat Real Estate Investments Apartments Mid-end
Samara Arabian Ranches Phase II Emaar Villas High-end
Sobha Hartland Mohammad bin Rashid City Sobha Villas, Apartments Luxury
Sparkle Towers Dubai Marina Tebyan Apartments High-end
Sterling Towers Business Bay Omniyat Apartments High-end
The 118 Downtown Burj Dubai - Apartments High-end
Suites in the SKAI Jumeirah Village Circle SKAI Apartments High-end
The Atria Business Bay Deyaar Apartments, Hotel Serviced Apartments High-end
The Palm Tower Palm Jumeirah Nakheel Hotel Serviced Apartments Luxury
The One at Palm Jumeirah Palm Jumeirah Omniyat Apartments Luxury
The Vertex Dubai Motor City Union Properties Apartments High-end
Vantage Jumeirah Village Circle Damac Properties Hotel Serviced Apartments  
Villa Lantana Dubiotech Tecom Investments Villas High-end
Yasmin Arabian Ranches Phase II Emaar Villas High-end
Zen by Indio Dubai Golf City Indigo Developers Villas, Townhouses High-end

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