Nakheel’s chairman Ali Rashid Lootah moved to take up a new position in Dubai World. Pawan Singh / The National
Nakheel’s chairman Ali Rashid Lootah moved to take up a new position in Dubai World. Pawan Singh / The National
Nakheel’s chairman Ali Rashid Lootah moved to take up a new position in Dubai World. Pawan Singh / The National
Nakheel’s chairman Ali Rashid Lootah moved to take up a new position in Dubai World. Pawan Singh / The National

Should buyers invest in off-plan or ready built in the UAE?


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Off-plan residential transactions in Dubai for the first six months of 2018 were down 20 per cent from last year during the same period, according to GCP-Reidin.  On the ready property side, sales in the first six months of the year held up well, with an increase of around about 6 per cent year-on-year.

Does this mark the end of off-plan sales and a switch back to ready units? Time will tell, but what is worth talking about is at what point in the real estate cycle this change occurs. When should the savvy investor give up on off-plan and move into the secondary market?

To answer this question, let's compare the two asset classes (as I really believe they are two separate classes within real estate), by examining the pros and cons of buying off-plan versus built and what buyers need to look out for:

Risk

Off-plan is a risky asset, which is one of the reasons you get a price discount. In Abu Dhabi, the 2015 sales law stated that each off-plan offering should come with a full prospectus, similar to those shown when investors buy riskier assets to make sure they have all the facts. There is a chance your property may not be built, may be built late or not to the specifications you expect, so be aware of your risk. The better-known developers will offer you less of a discount on market price because they are less risky - you pay more for less risk. Buying built property has its own risks but the unit is there for you to see and touch.

________

Read more:

Traps to avoid when buying property in the UAE

Why property is a good investment if you take out a mortgage

How long do expats need to stay for buying a home to make sense?

_________

Downpayments

The off-plan market is very attractive for those investors who don’t have the 25 per cent (for expats, 20 per cent for Emiratis) deposit. It is a way of paying for your property in instalments. Beware however, if you are using the off-plan purchase solely as a savings plan, developers don’t often pay you interest on your payments. Look into saving the money in a savings plan and then buying the property once it is built, particularly if the payment plan requires a lot before completion or there is not much of a price discount given. It might be cheaper earning interest on your money.  For built property you will need a pretty hefty deposit, at least 25 per cent if you are an expat.

Sales price

Price for off-plan is king. As mentioned above, this is a risky asset class so to take the risk you need to be paid for it. You will also expect a discount due to the opportunity cost of your funds. The developer pays you by offering you a much better price for off-plan than you can get in the market for built. If there isn’t a discount, then don’t buy off-plan.

Price appreciation

Again a huge draw with off-plan is not only that you are buying it at a discount to current market value but also that when it is delivered it will be worth even more, and here is where the timing matters. Off-plan properties usually take three to four years from initial launch to handover, so it is a good investment closer to the bottom of the market (but doesn’t have to be at the bottom), as if you buy near the bottom of the market the project should be delivered in a market that is already recovering. Off-plan property is not a great investment in a booming property market because these are typically near the peak, so when the project is delivered prices are on a downward trend.

You can’t easily sell off-plan property these days (they are an illiquid asset) so you have little opportunity to exit at the top, you need to hold it through to completion. So it is better to invest in off-plan when the market is bad but you can see an end in sight as opposed to when it is roaring.

Built property is better to buy at or near the bottom of the market as well, but because it is quite liquid you can keep investing in it as the recovery gets older without being too worried you will get stuck with it when the market starts to fall.

________

Read more:

Tenancy laws need a review to attract more UAE buy-to-let investors

Why buy a car in the UAE but not a home?

How buying a home in the UAE can halve your rent

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Choose your unit

One of the great things about off-plan sales is that you get to choose your unit from a wide range. You can select the type, view and floor – some developers will even let you customise it as you like. The downside is that you can’t see the finished article, so what you end up with might look very different to what you thought.

With built property you may not be able to get the exact unit you want, but you do know the general quality of what you are buying.

Opportunity cost

Opportunity cost is something not enough real estate investors understand or take into account when investing. The opportunity cost of money is basically what this money would be earning if you weren’t investing it into real estate. Chartered surveyors often use a 5 per cent return as a benchmark, as if you were putting your money in a high-interest account.

As discussed, when you make a payment on off-plan property the developer doesn’t pay you interest on that cash. Now you might think it isn’t costing you anything handing that cash over, but it does, it’s an opportunity cost. You are losing the opportunity to make 5 per cent per year on that money. That is a cost a professional investor takes into account when deciding where to allocate funds, and over three years it is 15 per cent (uncompounded). Make sure the final expected value of your investment takes into account opportunity cost, and risk before taking it.

Opportunity cost is where a built product kicks off-plan out of the park. If you buy tenanted property, then your money is “put to work” realising its earning potential and generating you a return from day one.

Ben Crompton is the managing director of Crompton Partners Estate Agents

'Outclassed in Kuwait'
Taleb Alrefai, 
HBKU Press 

Federer's 19 grand slam titles

Australian Open (5 titles) - 2004 bt Marat Safin; 2006 bt Marcos Baghdatis; 2007 bt Fernando Gonzalez; 2010 bt Andy Murray; 2017 bt Rafael Nadal

French Open (1 title) - 2009 bt Robin Soderling

Wimbledon (8 titles) - 2003 bt Mark Philippoussis; 2004 bt Andy Roddick; 2005 bt Andy Roddick; 2006 bt Rafael Nadal; 2007 bt Rafael Nadal; 2009 bt Andy Roddick; 2012 bt Andy Murray; 2017 bt Marin Cilic

US Open (5 titles) - 2004 bt Lleyton Hewitt; 2005 bt Andre Agassi; 2006 bt Andy Roddick; 2007 bt Novak Djokovic; 2008 bt Andy Murray

MATCH INFO

Austria 2
Hinteregger (53'), Schopf (69')

Germany 1
Ozil (11')

Sam Smith

Where: du Arena, Abu Dhabi

When: Saturday November 24

Rating: 4/5

ABU%20DHABI'S%20KEY%20TOURISM%20GOALS%3A%20BY%20THE%20NUMBERS
%3Cp%3EBy%202030%2C%20Abu%20Dhabi%20aims%20to%20achieve%3A%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3E%E2%80%A2%2039.3%20million%20visitors%2C%3C%2Fstrong%3E%20nearly%2064%25%20up%20from%202023%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3E%E2%80%A2%20Dh90%20billion%20contribution%20to%20GDP%2C%3C%2Fstrong%3E%20about%2084%25%20more%20than%20Dh49%20billion%20in%202023%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3E%E2%80%A2%20178%2C000%20new%20jobs%2C%3C%2Fstrong%3E%20bringing%20the%20total%20to%20about%20366%2C000%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3E%E2%80%A2%2052%2C000%20hotel%20rooms%2C%3C%2Fstrong%3E%20up%2053%25%20from%2034%2C000%20in%202023%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3E%E2%80%A2%207.2%20million%20international%20visitors%2C%3C%2Fstrong%3E%20almost%2090%25%20higher%20compared%20to%202023's%203.8%20million%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3E%E2%80%A2%203.9%20international%20overnight%20hotel%20stays%2C%3C%2Fstrong%3E%2022%25%20more%20from%203.2%20nights%20in%202023%3C%2Fp%3E%0A
The specs: 2018 Genesis G70

Price, base / as tested: Dh155,000 / Dh205,000

Engine: 3.3-litre, turbocharged V6

Gearbox: Eight-speed automatic

Power: 370hp @ 6,000rpm

Torque: 510Nm @ 1,300rpm

Fuel economy, combined: 10.6L / 100km

The specs

AT4 Ultimate, as tested

Engine: 6.2-litre V8

Power: 420hp

Torque: 623Nm

Transmission: 10-speed automatic

Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)

On sale: Now

What can you do?

Document everything immediately; including dates, times, locations and witnesses

Seek professional advice from a legal expert

You can report an incident to HR or an immediate supervisor

You can use the Ministry of Human Resources and Emiratisation’s dedicated hotline

In criminal cases, you can contact the police for additional support

The Specs:

The Specs:

Engine: 2.9-litre, V6 twin-turbo

Transmission: 8-speed automatic

Power: 444bhp

Torque: 600Nm

Price: AED 356,580 incl VAT

On sale: now.

Difference between fractional ownership and timeshare

Although similar in its appearance, the concept of a fractional title deed is unlike that of a timeshare, which usually involves multiple investors buying “time” in a property whereby the owner has the right to occupation for a specified period of time in any year, as opposed to the actual real estate, said John Peacock, Head of Indirect Tax and Conveyancing, BSA Ahmad Bin Hezeem & Associates, a law firm.

Key facilities
  • Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
  • Premier League-standard football pitch
  • 400m Olympic running track
  • NBA-spec basketball court with auditorium
  • 600-seat auditorium
  • Spaces for historical and cultural exploration
  • An elevated football field that doubles as a helipad
  • Specialist robotics and science laboratories
  • AR and VR-enabled learning centres
  • Disruption Lab and Research Centre for developing entrepreneurial skills
Results

6.30pm: The Madjani Stakes (PA) Group 3 Dh175,000 (Dirt) 1,900m

Winner: Aatebat Al Khalediah, Fernando Jara (jockey), Ali Rashid Al Raihe (trainer).

7.05pm: Maiden (TB) Dh165,000 (D) 1,400m

Winner: Down On Da Bayou, Royston Ffrench, Salem bin Ghadayer.

7.40pm: Maiden (TB) Dh165,000 (D) 1,600m

Winner: Dubai Avenue, Fernando Jara, Ali Rashid Al Raihe.

8.15pm: Handicap (TB) Dh190,000 (D) 1,200m

Winner: My Catch, Pat Dobbs, Doug Watson.

8.50pm: Dubai Creek Mile (TB) Listed Dh265,000 (D) 1,600m

Winner: Secret Ambition, Tadhg O’Shea, Satish Seemar.

9.25pm: Handicap (TB) Dh190,000 (D) 1,600m

Winner: Golden Goal, Pat Dobbs, Doug Watson.

Simran

Director Hansal Mehta

Stars: Kangana Ranaut, Soham Shah, Esha Tiwari Pandey

Three stars