Our CEO Firas Al Msaddi strongly believe that the Dubai’s property value would still remain grounded despite the impending VAT in the country. According to him, there has been no price appreciation in the off-plan properties through this year and that will not affect secondary market values as well.
Even though many are still contemplating about the effect of upcoming VAT in the UAE especially in real estate industry. One thing's for sure, Dubai property value will not attract price hike in the new year. Developers ensure their off-plan projects will remain unharmed and they will still supply the same range of products in new phases with even more attractive offers and reasonable payment options.
If the projection will take place in the new year, developers will attract more buyers compared to individuals who want to sell off their properties in the secondary market. Usually, individual sellers would want to sell their property at a premium to what they bought. However, developers can offer the same project with a fresh payment plan and attractive sales promotions.
Our CEO mentioned, “It’s almost impossible to resell because they can’t compete with the developer. If you bought in January and has paid 30-40 percent and if I come to buy from you, I have to pay the 40 percent plus the premium, which doesn’t exist today. But if I go to any developer, I can buy in the same project and get a fresh payment plan plus be part of any sales promotions.”
Since there has been no price appreciation in the off-plan properties, and transactions have become easier, sophisticated and professional then it will effectively attract buyers and investors.
Developers will remain still and look after on how the consumers will adjust to the impending VAT. Even residential sales will fall on zero-rated but prospective buyers will need to adjust and manage their finances. Furthermore, developers will also have some adjustments to make. In order to avoid losing out buyers, developers cannot just pass on their VAT charges on construction to their property buyers.
“These days, the sales prices haven’t left any decent buffer for developers. The way developers make their money, they need to invest less equity, get funds from banks and the rest from off-plan sales,” “This means off-plan sales and the time frame to actually get the down payments become extremely time-sensitive.” Said by our CEO Mr. Firas Al Msaddi
“Sometimes, it’s more important than their margins. If a developer invested 20 percent equity, even if he makes 5 percent, it’s still 25 percent on equity, which is not bad if you annualise it.
“But if the developer has to wait for off-plan sales and payments to come, he will have to inject equity from his own pocket. And his margin from an ROI (return on investment) standpoint will become lower and lower to the extent it becomes not worth selling.”
Dubai properties have seen no increase over the last 2 years and it is favourable on the developer’s cost side.
Rezoning played a big role in the health of Dubai’s real estate sector, master developers have intervened and started rezoning to areas like Majan and Arjan. They introduce smaller plots and eliminate the momentum of trading in the land. There are also freehold properties from master-developers in areas such as Satwa, Jebel Ali, and Nad Al Sheba.
Our CEO mentioned: “In 2014, investors made so much money on land,” he added. “Land sold in 2012 for Dhs 190 per square foot doubled in price in one year. For example, in Downtown, there was a doubling in proven transactions and these were being advertised for even more. There were plots being advertised in Downtown for Dh550 as opposed to Dh375-Dh400.”
Landholders or sellers should understand that there is no reason for land prices to increase. Real estate transactions and services will increase but not the actual prices of the property.
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