Home sellers in Dubai are unfazed by off-plan incentives offered by the city’s real-estate developers. The incentive program offered by the top real estate companies in Dubai and other major builders has resulted in a spike in demand for the properties currently on the market. This has led to a significant dip in prices paid by home sellers across the city. While some areas saw price decreases of up to 30 percent, others saw decreases of up to 60 percent. Some areas saw drops of more than half.
What is behind this unusual drop? Some experts believe that it is a result of an unintended impact of the incentive program. The buyers, who were encouraged to act rapidly when the incentive packages first became available may have rushed into purchasing a home before they had fully considered their financial situation. Now that the incentives are withdrawn, the buyers are left without that incentive and are not able to buy at bargain-basement prices.
But there are also some who believe that the drop in prices is a direct result of a surge in supply. A number of developers had planned to expand their development teams when the incentives first became available for villas for sale in Dubai, but they were unable to keep up with demand. The result was that they were left with too little space to build on. Consequently, when the buyers’ incentives became withdrawn, the real estate developers simply had to increase their production efforts to make up for the lack of available space.
So where does this leave the prospective buyer in Dubai? If you are planning to buy a property in Dubai, now is definitely the time to look for one. It is a buyer’s market and you are likely to be able to find a great house that is still under construction. In some cases, the construction is complete and the seller is simply waiting for the final few buyers to come along before completing the project. Off-plan incentive programs are not the only reasons that sellers in Dubai have become more eager to make offers to potential buyers. Some of the reasons that they have changed their tactics include:
The incentive plan gone wrong – After the incentives plan was introduced, most real estate developers quickly realized that it was a major source of revenue. Suddenly, it became easier to attract buyers to the market than it had been before. Off-plan incentives allowed developers to increase their production levels, so they were able to finish projects on time and to keep building. The result was that many projects did not meet the schedule, which caused the delays that ultimately affected the local economy. Off-plan incentives saved the city’s developer from financial ruin.
The threat of being taken over – Dubai has the world’s largest man-made oil refinery at the Sheikh Zayed mosque. Oil accounts for approximately ninety percent of the city’s gross domestic product. Without oil, Dubai would not be able to support its strong economic system and the national currency, Dubai dollars, since international trade is very important for the country’s development. The loss of oil sales to neighboring countries has forced some of the world’s biggest banks to rethink their investments in Dubai real estate but the incentives offered by the government bowing to pressure from the global community have helped the city to weather the storm.
The fear factor – Buyers are not necessarily motivated by the prospect of getting an extravagant house. They are motivated by the thought of having a secure future in a place where they can raise their family without worries about job security or living in a place where crime rates are extremely low. A development like Dubai, with its vibrant and thriving city life, its infrastructure-well-maintained, safe neighborhoods, easy availability of jobs, education, and healthcare and excellent tax benefits, can be hard to pass up for many prospective buyers. Off-plan incentives such as the FDI in the form of freehold purchase and low property charges attract many buyers who are not so keen on the price appreciation factor, but they do appreciate the fact that they can rent a home for a comfortable price while making a substantial profit during the term of the contract.
The positive mood in the market might be short lived however. Dubai could face a correction in the rate of growth of the economy. The government needs to consider measures to mitigate the impact of the off-plan incentives on the price of properties for sale. This could lead to a squeeze in supply, with the result that prices may go up again in coming years, if not sooner. Home sellers in Dubai therefore need to brace themselves for the possibility of higher rates of property appreciation, and plan their purchases wisely before investing.