Developer’s Need To Complete 50% Before Selling – Dubai

Gulf News reported yesterday that Developers will be expected to complete 50% of projects before selling.

February 2018
Check out below my views on the subject –

Laura Adams, Carlton Real Estate

Dubai’s developers may no longer be able to rush out with their off-plan sales — they will need their projects to reach the 50 percent mark before they do so.

The earlier requirement was for a project to be 20 percent ready before sales could be launched.

What does this mean for homeownership in the off plan sector?

It will not really affect the buyer of off plan, only the Developer’s, buyers will have more confidence in the properties they are purchasing as they will actually be able to see it half constructed.

I would expect payment plans would be adjusted ie. usually the first payment on purchasing off plan is in line with the construction, which is at present 20% – I doubt that developers will charge 50% down payment on purchases when this is introduced.

We are already seeing developers offering interest-free post payment plans of up to 2-3 years so I would assume this would be the new way to buy off plan once the Law is introduced.

How does market dynamics affect?

This just is another important step the Government of Dubai has taken to take a more strategic approach to the development of Dubai.

The market’s future supply will be within the same lines as the growth of the Country.  This is a wise move and a great comfort that they are doing what they can to ensure the sustainability of the Dubai Property Market and the economy of Dubai.

We will see more secondary market sales as opposed to what has been happening in the last two years where off-plan sales have been more than 200% higher at times, than secondary sales.  

I would also expect banks to be more accepting of financing off-plan projects, so hopefully, this should open the door to assist first time buyers in the region, which we are seriously lacking due to the high costs involved ie. 500k to buy a one bedroom as downpayment for a ready property.

For example: If you are on a 30k a month salary, paying 90k a year rent with a car, etc… this will take more than 3 years to save if they put away half their salary.  Hopefully with this new law banks will be able to assist with higher LTV than 75%

How will the off-plan buying and sales be affected?

It really depends on the Developers, what kind of payment plans they will be offering and what they expect to receive as an initial reservation payment.

Overall, how good is this for the market?

It will certainly result in a reduction of developers on the market, most are using sales of the project to construct, apart from the major players.  It will really improve the quality of the properties available, as buyers will be able to see what they are promised is being developed (views etc).  Trust in the market will be increased. 

Will it add further pressure on the sales?

Definitely, developers are already feeling the pinch from the oversupply we are currently experiencing, the speculative investors are no longer in the market as there is no flipping happening during construction with higher premiums.  Like every new law, things will settle down and the market will adjust to accommodate. 

This obviously means less supply in the short term and less pressure on prices.

There is enough supply of already sold out, off plan developments until 2021 so we not see this issue, even if the law is enforced today, there are enough properties until then.

But what does it mean for small developers?

Most smaller developers will build on finance or investment, it will be tough as they will have to wait longer for a return for investors, but I really do not see it being a massive problem.

What would be worse for the smaller developers would be for the release of new developments to continue like has done for the past two years.

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