Dubai is one of the most popular holiday destinations these days, and the Sheikdom continues to attract more expats to move over here to start a new life in the world of possibilities – I am one of them. In recent months, the Sheikh announced that Dubai has been set to double in size and population by 2040, this is a massive undertaking but if any city in the world is capable of doing so it is Dubai. This City is known for the biggest, first, and most futuristic undertakings whether in Real Estate, entertainment or pretty much any other category – the leaders of this Sheikdom are really forward-thinking trying to create the best place to live on Earth.
If you look back to the 1990s, Dubai was nothing but a small harbour town. Looking at the picture below, you can see the vast expansion undertaken in just 30 years, and trust me, the pictures do not give it justice even…
Whilst the past few decades focused on developing shoreline land, now Dubai is set to expand into the desert. And this is where off-plan investments become crucial. Most of the shoreline communities are naturally maturing with little to no land available, making these last off-plan launches selling out like hot cupcakes in a bakery. But, more on this in the articles further down.
What is an off-plan investment?
Off-plan investment is nothing else but actually purchasing a property straight off an architectural draft and CGIs, in Dubai, these investments will frequently be a ditch of sand somewhere. This is just to paint a picture of the reality of such investment. Purchasing off-plan comes with a number of risks (as any investment really), especially as these projects sell out even before construction commences.
Off-plan sales usually launch 3 to 5 years before the completion date, and believe me when I say it, a number of them sell out within hours of launching. The recent Marina launch by Emaar has sold out within 15 minutes of inventory going online. Developers started imposing restrictions on purchases due to demand, for example, some projects only allow 1 unit per customer. This is due to the fact that in recent years, some projects were bought out by just 10 investors, with some purchasing mere 12 floors in one development. If these facts alone don’t convince you I’m not sure what will.
Why is off-plan so attractive?
It is crucial to understand that only certain projects are so attractive on the market, and You should discuss any purchases with a trusted broker to ensure you make the right decision.
Off-plan is becoming more and more attractive in Dubai for a number of reasons, and here are my Top 4:
- Maturing Communities – Certain communities become mature, meaning there is no land left to develop on. This is true in areas such as Dubai Marina, Downtown or Business Bay to name but few. These are attractive neighbourhoods for young professionals where you can mainly see skyscrapers with residential apartments. Some of these blocks are 20 years old, which makes the latest developments so attractive as these areas offer great rental demand with people willing to pay premiums.
- Below Market Value Rates – all off-plan projects are sold BMV with discounts of 20%, this does not account for asset appreciation before the project is even completed. Many investors would only purchase off-plan projects, and try to flip them even before completion dates with significant profits made; this practice is not allowed anymore under Dubai Law and assets can be only sold upon completion. However, it is not unheard of that some of the assets double in value by the time they are complete making it an extraordinary investment strategy.
- New Communities – whilst off-plan is so attractive in mature communities, it is equally an opportunity to invest in one of the newest communities set to launch across Dubai; this is an exciting opportunity to purchase a portfolio at a massive discount, especially in Phase 1 release. One of the most attractive recent releases is DAMAC Lagoons, Tilal Al Ghaff or Al Barari. These villa communities will be the new luxurious destinations for high-net individuals.
- Expanding Communities – certain developers in Dubai own extensive lands which they develop on, one of such communities in Dubai Hills owed by Emaar; they continue to release new sub-communities within their master development with many more to come. Dubai Hills is one of the most popular and sought-after destinations in Dubai, meaning that investments there will most definitely deliver good yields.
Where to look out for off-plan opportunities?
There are number of off-plan projects launching across Dubai so please do get in touch if you want to find out more information.
Palm Jumeirah
This is an obvious choice for many investors and end-users. The man-made island is an attractive investment spot with a high number of monthly transactions, and many flipping opportunities. The Fronds span exclusive villas, and even the Beckhams decided to purchase their holiday home there.
Palm Jumeirah has a few scheduled projects that will be coming online, and they will be selling out faster than hot cupcakes. Get in touch to discuss your off-plan investment opportunities there.
Projects will include: residential apartment blocks, hotel apartments, and serviced accommodation towers. There are a few residential land parcels available for sale off-market, if you’re interested, please do get in touch.
Investment strategies: flipping, serviced accommodation, single let, long-term investments.
Dubai Marina
The Marina is a hot spot for young professionals in Dubai, the neighbourhood spans good restaurants, bars, canals, and beach access. This is a perfect spot to live in this great city for many. The market is heavily saturated, however, a lot of the apartment blocks have worn over the years, meaning, the new stock coming available on the market will be the new hot stock on the market, always in a better condition compared to older buildings in the area.
There are only a couple of projects left to launch as there are no land parcels left to purchase. Any launches in this area come with great rental yields.
Investment strategies: resale to first-time buyers, serviced accommodation, single let.
Downtown
Downtown is a hotspot for financiers, bankers, and entrepreneurs who work in the City. Moreover, this is a perfect spot for temporary accommodation for people visiting Dubai on a short-time basis during conference seasons in particular. Executive travellers flee to this part of Dubai, including consultants, investors and even holidaymakers. Downtown is known for exclusive mixed-used outlets combining hotel services and residential living. This is definitely a place where the middle-class earners like to reside with a little bit more income, especially single professionals and couples.
Similarly to the two neighbourhoods above, Downtown’s stock availability comes to an end, however, there are definitely more projects due to launch than in Marina and The Palm.
Investment strategies: resale, single lets, serviced accommodation.
Dubai Hills
Dubai Hills is owned by Emaar, one of the biggest developers in the MENA region. This community boast a variety of units, from apartments, and townhouses to detached villas. This is usually the first choice of many people who consider living in villa communities in Dubai. Emaar ensures to release new projects annually, and there is so much more land to be developed on. The variety of stock allows people from all walks of life to live here with apartment rents starting at AED 45,000 per annum or villas renting anywhere up to c. AED 1,200,000 per annum.
Emaar offers trust to investors due to the number of projects completed across Dubai and abroad. Many landlords own several units in this area as it is always a popular choice for residents of Dubai.
Investment strategies: flipping, resale to first-time buyers, single lets, serviced accommodation.
Jumeirah Golf Estates (JGE)
This is more of a hidden gem and surprisingly not many people know this area. JGE offers ultra-luxury living, being one of the oldest villa communities in Dubai. This neighbourhood comprises 16 communities stretched across the best Golf Course in Dubai, which hosts DP World Tour every year. I’m not going to lie, this is my favourite area as it is where I started my journey with Real Estate in Dubai.
JGE offers a variety of units, including apartments in Al Andalus, villas and townhouses. This neighbourhood has reached its maturing with very few projects still to be released in the coming years. This is definitely a destination for golfers and people looking for a quiet community inspired by Mediterranean countries.
Average rents for the vills in this area start at AED 500,000 per annum, going anywhere near AED 2,000,000 per annum in the most exclusive communities. The area started to be developed in 2009 therefore there is a lot of potential for investing in this area for those interested in flipping in particular. Moreover, most of the units benefit from long-term tenants because once you’ve lived in JGE it is hard to leave. This is not a community for entry-level purchases with villas selling anywhere upwards from AED 7,000,000.
However, only 25% of the JGE master plan has been developed; therefore, there are more projects to be released in the coming years. But, none of them was yet confirmed. Join my broadcast list to find out if there are any JGE projects coming along.
Investment strategies: flipping, single lets, resale.
Other communities to consider
- Al Barari
- Tilal Al Ghaf
- DAMC Lagoons
- La Voile
- Seashore
- Arabian Ranches III
This is just a few of the hot projects, get in touch to find out more.
Detailed reports on each of the above communities will be linked soon.
How to determine which projects should I invest in?
Speak to Your Trusted Broker
Having a trusted broker is important in Real Estate investments, brokers are working day in and out amongst developers and other brokers discussing the newest releases and hottest investment opportunities. Your broker will be able to check that the project is on track for completion, that all relevant documents and permits are still valid with Dubai Land Department etc. This is crucial in mitigating the risks associated with off-plan investments.
Assess Master Developer
Always check what other projects the Master Developers have worked on previously, especially in the Middle East. This is nothing but a short search on Google but speak to your Dubai friends and brokers to understand if any of the projects have been undelivered. Purchasing from experienced developers in Dubai always provides a level of confidence for investors, such as Emaar or DAMAC.
Assess Master Plans
This may seem more tedious but it is always important to understand the wider plan for the entire development. Purchasing in Phase 1 might be beneficial if you’re looking at a long-term investment strategy as your asset will reach maturity once the neighbourhood is fully developed contrary to when there is still construction going around. However, this is not to say that you will not be able to see instant appreciation on handover. Purchasing in further phases of the development, you can expect the entry prices will increase and there are a few factors involved in this: track record, i.e. you know the project has been partially completed already; rental data, i.e. you are able to ascertain clear rental yields based on past information recorded; popularity, i.e. you will understand how popular the area is with renters and buyers alike…
Determine Rental Yields or Asset Appreciation
Precise assessment of rental yields and asset appreciation is virtually impossible in new communities simply because there is no data produced supporting such claims. This is where the Master Development assessment comes to play; this definitely comes with greater risks; however, experienced Real Estate Brokers will be able to make comparable predictions from the market. This will be based on the developer’s track record, rental income in similar neighbourhoods, and conversations with the developer’s agents on the ground to ascertain the following: popularity amongst investors and end-users and the speed at which the development was sold out.
Secondary Market vs Off-plan
Can I get a mortgage for an off-plan purchase?
Mortgages are widely available for secondary market investments. In Dubai, unlike in many other countries, getting a mortgage is pretty straightforward as long as you meet some of the requirements, which include:
- Being in employment for at least 3 months
- Have a permanent contract, i.e. you cannot be on a probationary period
- Meet affordability criteria
Of course, the above is just the tip of the iceberg when it comes to mortgages, but if you require any further information, please get in touch via WhatsApp and I will put you in touch with one of the best Mortgage Advisors in Dubai.
In the UAE, investment mortgages are not available; therefore, even if a property is purchased under a company name, the mortgage must be held under the director’s name and they must meet the required criteria.
However, all off-plan purchases must be completed in cash as no mortgage products are available on properties that are not completed.
Is it a top-up investment?
The property will not be ready for a few years from the day of the purchase; therefore, your off-plan property can be technically classed as a Top-up investment until it generates any income. On the other hand, any purchase on a secondary market is able to generate income from the get-go.
What are the risks of investing off-plan?
Project Delays
Constructions run behind, everywhere, and we need to accept this fact. Regardless of where you are you can expect a delay, which is no different in the UK.
Developers going into administration
Purchasing from smaller developers can come with a risk of them going into administration. However, over time, you will be able to recoup your money, at least partially, as projects tend to be bought out by banks to ensure projects can be finalised. Payment plans ensure that you will not be required to pay the full price until the property is handed over; some developers now even offer 5-year post-handover payment plans. This is to ensure that the investment upfront costs are minimised with some developers only needing 20% of the overall price before handover; this significantly diminishes the risks associated with purchases from smaller developers. Bigger players are unlikely to offer such payment plans but their project delivery track record offsets the risks.
Partial completions on master plans
It isn’t unheard of that projects will only be completed partially. Whilst homes may be handed over, the developers may not complete the community to the standard as outlined on the master plan, e.g. not delivering on parks, green belts etc. In villa communities it is likely that such details will be picked up by the community management team, delivering on the master development over time. This may adversely affect your asset value but this will have a minor impact speaking from experience.
So is it a good idea to invest off-plan?
Investing off-plan is definitely for cash-rich investors, this is due to a limited number of financing available on the market. This is not to say that it is impossible to borrow money to start your investments in off-plan, but I’m not here to discuss creative finances.
Off-plan investments bring high rewards, especially in highly-desired or new luxurious communities, every experienced Real Estate broker will be able to determine the most investable projects. This is, in particular, true with major developers active in Dubai, such as Emaar, DAMAC, and Nakheel. Each of those developers holds a significant amount of land across Dubai:
- Emaar – developed the oldest villa community for expats, called Emirates Living, now develops Dubai Hills Estates and other projects around Dubai. Moreover, they developed towers and apartments across the most desirable locations in Dubai. Emaar is extremely popular amongst Middle Easter and GCC investors, known for the quality of its products. However, focusing solely on delivering volume which compromises space within these villas and apartments.
- DAMC – another massive player in the sector, again, large portfolio developed in residential and mixed-use towers, now developing more modern communities of Dubai, such as DAMAC Hills 1 and 2, DAMAC Lagoon and so forth. DAMAC is extremely popular with foreign investors, known for extremely good quality villas – contrary to what people who live in Dubai think.
- Nakheel – the third main player in Dubai, mainly responsible for all the land in the Uptown area of Dubai, all areas and buildings that have Jumeirah in their name are owned or partially owned by Nakheel: Jumeirah Golf Estates, Jumeirah Park, Dubai Marin, Palm Jumeirah and so forth. Nakheel is known for well-sized plots and villas in their communities with impeccable finishes; these villas despite their age still serve as a good quality stock compared to other communities.
There are a number of smaller developers in Dubai delivering exceptional quality products, please get in touch to discuss other opportunities in the area.
To conclude, the main benefits of investing in off-plan include:
- Fast asset appreciation
- Opportunity to invest in the newest luxurious communities
- Opportunity to invest in matured communities by purchasing a brand new stock
- Below Market Value purchase price
- Payment Plans
- Often waived DLD Fee (Property Tax Rate/Stamp Duty)
Do you want to know more? Contact me at daniel.berlinski@ascotandco.com.