"Taking a cue from recent history, rules on off-plan property deals now more secure"
We all witnessed the property boom in 2007 where a majority of investors profited highly from the speculative market and the general world economy.On the other hand, some of us were here to see firsthand the recession in 2008 which caused the Dubai property bubble to burst and prices to plummet by some of the biggest margins ever seen.
The sight of empty cars at airports, construction work on projects halted midway and a vast majority of people losing their livelihoods because of the crash, all contributed to a bleak outlook.
In hindsight, we should have known that the crash was coming; but at the time, there were not enough regulations in place to at least soften the blow.
Six years on from the bubble, are we any wiser? And have we learned from our mistakes? The property market is again booming with prices soaring at a year on- year rate of 30 percent to 40 percent in prime areas across the region.
Developers are building and releasing new projects to the public one after the other as a high demand for properties from developers with a good track record persists.
Off-plan property is being fueled by buyers who are keen to buy properties which are new, modern and cheaper than other alternatives. With a variety of payment plans available with different developers, investing off-the-plan is as easy as ever. It is then no surprise that, at the same time, investors are using this as an opportunity to make a quick profit. Even with the transfer fee increased to 4 percent, investors are finding buyers who will pay good premiums just to be able to secure property, after missing out on the initial launches. The demand is higher than the supply, and with prices moving up, investors are keen to not miss out. There are now more measures and regulations in place introduced by the Dubai Land Department and RERA to ensure that the market will remain stable amidst [rapid] growth.
First was the recent increase of the property transfer fee to 4 percent which has, in its own right, helped reduce speculative buying whose sole aim is to flip property quickly. With the fee increase, investors have to factor in an extra 2 percent which would eat into their expected return on investment. A step being taken by some developers, on the other hand, is ensuring that a certain amount has been paid on the property before it can be sold, such as up to 50 percent of the total amount. This ensures that sellers or buyers will have to factor in more costs upfront if they are buying on resale and, therefore, some speculators are looking to other options. Some developers have also gone as far as not allowing registered realty agents to sell any property they buy until completion. This has stopped majority of agents who were buying just to flip as they would have to hold on to their investment for a number of years before being able to sell it.
With these changes coming into effect to stabilize and regulate the market, off-plan is in a much safer place. There is no denying the fact that the off-plan market is again booming, and that sellers are again starting to flip properties; but we are also in a market where the money the developers are receiving is staying in separate escrow accounts which can only be accessed at certain stages of completion. This ensures that if the market was to turn, we would not be stuck in the same predicament of developers having already spent the money on other projects. We would be prepared with money in escrows to at least finish started projects.
Safura Abas
General Manager, Aston Pearl Real Estate
We all witnessed the property boom in 2007 where a majority of investors profited highly from the speculative market and the general world economy.On the other hand, some of us were here to see firsthand the recession in 2008 which caused the Dubai property bubble to burst and prices to plummet by some of the biggest margins ever seen.
The sight of empty cars at airports, construction work on projects halted midway and a vast majority of people losing their livelihoods because of the crash, all contributed to a bleak outlook.
In hindsight, we should have known that the crash was coming; but at the time, there were not enough regulations in place to at least soften the blow.
Six years on from the bubble, are we any wiser? And have we learned from our mistakes? The property market is again booming with prices soaring at a year on- year rate of 30 percent to 40 percent in prime areas across the region.
Developers are building and releasing new projects to the public one after the other as a high demand for properties from developers with a good track record persists.
Off-plan property is being fueled by buyers who are keen to buy properties which are new, modern and cheaper than other alternatives. With a variety of payment plans available with different developers, investing off-the-plan is as easy as ever. It is then no surprise that, at the same time, investors are using this as an opportunity to make a quick profit. Even with the transfer fee increased to 4 percent, investors are finding buyers who will pay good premiums just to be able to secure property, after missing out on the initial launches. The demand is higher than the supply, and with prices moving up, investors are keen to not miss out. There are now more measures and regulations in place introduced by the Dubai Land Department and RERA to ensure that the market will remain stable amidst [rapid] growth.
First was the recent increase of the property transfer fee to 4 percent which has, in its own right, helped reduce speculative buying whose sole aim is to flip property quickly. With the fee increase, investors have to factor in an extra 2 percent which would eat into their expected return on investment. A step being taken by some developers, on the other hand, is ensuring that a certain amount has been paid on the property before it can be sold, such as up to 50 percent of the total amount. This ensures that sellers or buyers will have to factor in more costs upfront if they are buying on resale and, therefore, some speculators are looking to other options. Some developers have also gone as far as not allowing registered realty agents to sell any property they buy until completion. This has stopped majority of agents who were buying just to flip as they would have to hold on to their investment for a number of years before being able to sell it.
With these changes coming into effect to stabilize and regulate the market, off-plan is in a much safer place. There is no denying the fact that the off-plan market is again booming, and that sellers are again starting to flip properties; but we are also in a market where the money the developers are receiving is staying in separate escrow accounts which can only be accessed at certain stages of completion. This ensures that if the market was to turn, we would not be stuck in the same predicament of developers having already spent the money on other projects. We would be prepared with money in escrows to at least finish started projects.
Safura Abas
General Manager, Aston Pearl Real Estate