As Dubai’s real estate market continues to boom, here’s what to watch for ahead of property purchase
As Dubai’s property market continues facing high demand from investors, industry experts advise to exercise caution and conduct an abundance of research while treading the landscape of property developers and projects in the city.
“Developer track record is one of the main metrics to look at when evaluating a developer because that will help predict its future projects,” said Yassir El Ghazi, managing partner, McCone Properties. “Reputation is the next one to look at as it goes beyond the building quality and focuses on building maintenance after the project is handed over.”
Paul Sharland, Associate Director, Off Plan & Investment at haus & haus agreed, emphasising the importance of reviewing a developer’s past projects and the quality of their finishes. “A good developer should have a proven history of delivering on time and meeting expectations,” he said, adding that, “There are always developers to be cautious about.”
The booming market of recent years has attracted a wave of new developers, but experts noted this influx brings both opportunity and risk for buyers.
Experts advised several methods investors can apply, alongside tell-tale signs and red flags to watch out for, to make informed property investment decisions. In a market as competitive as Dubai’s, these factors can make the difference between a sound investment and a costly mistake.
Both experts highlighted the risks that can arise from inexperienced developers entering the market. Sharland recounted experiences from the 2005-2008 period, “We often saw first-time developers struggle due to a lack of cash flow. Many couldn’t complete their projects, leaving buyers at a loss,” he said.
While Dubai’s regulatory environment has significantly improved since then, the fundamental risks associated with inexperienced developers still exist.
El Ghazi pointed out that while the influx of new developers is generally positive for Dubai, it does introduce potential pitfalls for investors. “Some of them will face issues as they are new to Dubai and real estate development as a whole, which causes risk to investors,” he cautioned.
Overall, experts highlighted that the allure of a new project or an attractive price point should not overshadow the importance of working with established, reputable developers.
Protecting investor interests
To mitigate these risks, investors are advised to make well-informed decisions through thorough market research.
“Always work with a trusted broker who has a strong reputation,” Sharland said.
El Ghazi provided an actionable tip for buyers: “Investors need to request the developer to provide a building materials specification sheet to be included in the SPA (Sales and Purchase Agreement), including the appliances that will be used. This is crucial as it protects the investors on handover so they can refer back to it and check if the developer delivered on what was promised.”
Red flags and warning signs
Both experts stressed the importance of being alert to potential warning signs. “Some common red flags include unrealistic promises, poor project management, and missed deadlines,” Sharland cautioned.
El Ghazi highlighted that “The biggest red flag is if the deal is too good to be true, it probably isn’t.”
“Most of the bad experiences that happen with developers in Dubai are about the building quality,” he added.
In terms of investment strategy, Sharland recommended focusing on townhouses, villas, and three-bedroom apartments. “There’s currently a significant undersupply in these segments, which makes them a solid investment,” he explained.
Earlier this year, Arabian Business reported that Dubai’s residential stock currently amounts to 800,000 units, of which 15 per cent are villas and townhouses and 85 per cent are apartments.
“Townhouses/villas typically yield higher returns on investment and lower service charges compared to apartments, enhancing their attractiveness,” said Haider Tuaima, Director & Head of Real Estate Research at ValuStrat.
Dubai real estate: All you need to know as a first-time home buyer
El Ghazi provided a broader perspective on investment strategy, “When investing in real estate, it’s very important to look at the bigger picture, to look at the government plans and vision for the area as well as the surrounding infrastructure. Another factor is the developers that are currently building or are planning to build in the area as that will almost guarantee the price appreciation on handover.”
Seasoned investors are increasingly looking beyond individual properties to consider broader market trends, government initiatives, and long-term development plans.
Dubai’s property sector continues to offer significant potential, but realising that potential requires careful consideration and expert guidance.
“Check reviews not only for companies but also for individual brokers. Doing your research can save you from a lot of headaches down the road,” Sharland concluded.
For a detailed perspective on the property market, visit: Dubai - VPI Residential Capital Values - August 2024
