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.
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.
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
Major Projects Launched in 2014
To report any inaccuracies in this report, please contact us.
Studio, 1 and 2 bedroom apartments in Al Khail Heights.
Pay 50% now. 10% on completion (Dec 2016) and then 40% over 2 years. One of the best investment opportunities in Dubai.