With the Expo 2020 not very far away, developers in Dubai are thinking of creative ways of enticing buyers to purchase UAE properties. And how are they doing this?
To begin with, developers are waiving off the 4 percent registration fee to buyers of UAE properties and rolling out monthly payment schemes such as “capital guarantee” and “money back”. In fact, ace Dubai-based developer, Damac Properties, has announced a guaranteed annual return on advance payments during construction of 3 percent per year. The developer has claimed this to be equivalent to twice the interest on fixed deposits in a bid to entice buyers and will offer this interest twice a year until completion of the unit. Rental guarantee schemes are also being offered on Damac villas at Akoya Oygen and Akoya by Damac Towers by Paramount Hotels & Resorts (A, B and D); NAIA Ghalia, Damac Maison Majestine; Merano Tower; Paramount Tower Hotel & Residences; Damac Maison Privé (A and B) and NAIA Vantage.
Another option that has gained recent popularity is the “capital guarantee" which ensures UAE properties’ value for two years after delivery. It also implies that the developer will pay the difference to the investor if the unit price shows decline between the time of delivery and the end of 2019.
Does this signify confidence in and growth of the Dubai real estate sector? We at Better Homes think that such offerings are signs of belief in the sustainability of the Emirate’s property industry and are a good opportunity for those looking for safe investment and high returns in a stable market.
In February this year, Emaar Properties, Dubai’s largest developer, announced that it was waiving off the 4 percent registration fee on Casa villas in the Arabian Ranches development. Even better, this has been offered on ready to move in units. The developer has begun giving customers 12 months to make the full payment with the property agents minus the agency commission of 2 percent, transfer charges of 4 percent and the Oqood land registration charge of 4 percent which will be paid by the developer, Emaar itself.
Another developer, Aqua Properties, is making it easier for people to buy UAE properties, by offering a seven-year monthly payment plan for apartments in Skycourt Towers, Dubailand. Not just that; the developer claims that investors can expect a return on investment of over 10 percent. Seven Tides International, also a developer, has upped its guaranteed return on investment of 10 percent net per annum for three years under its hotel managed rental scheme.
According to recent estimates, UAE properties may continue to see a slight slowdown in activity this year due to lower oil prices. However, the market is anticipated to begin recovery in 2017 as infrastructure work surrounding the Dubai Expo 2020 gets underway. So, overall, while prices and rentals are likely to soften in the short term, they are likely to rise by 2017. The government’s infrastructure spend in the run-up to Expo 2020 is expected to sustain the property market and the population is expected to increase to five million by 2030, and in turn fuel demand for housing.
With the rolling out of such measures, UAE properties are becoming accessible to mid-income and salaried individuals who can now dream of owning a home in freehold locations. By making it theoretically cheaper to pay a mortgage than rent, given the stabilisation in sale prices of UAE properties in addition to sharp increases in rents, there has also been a change in expat outlook towards Dubai in general.
Traditionally considered more of a transit zone for expats, Dubai is presently increasingly being seen as a place for long-term stay. People are beginning to look at the city as home rather than just a transitory destination, are planning on staying longer and hence thinking of investing in a house rather than just renting one for a while. Interestingly, approximately 80 percent of mortgages in Dubai are taken out by end users, in particular, young couples taking the opportunity to invest in their first family home, and representing the majority of new mortgage seekers in the Emirates. This is testament to the fact that more people are not only considering home ownership, but that the shift from people renting to buying is great for stability of the market for UAE properties in the long term.
Experts are suggesting more policy changes and incentives to encourage homeownership, such as a better LTV rate for first-time buyers and reduced DLD fees. We at Better Homes also believe in the importance of maintaining affordability for the average first-time homebuyer, as in the majority of cases, financing tools such as mortgages and easy payment plans are critical to encourage participation in the real estate industry.