Do prime units within a project make a more viable investment?

 
  • Do prime units within a project make a more viable investment?


    This question particularly applies to investors looking to buy in off plan projects. The key motivation for investing in a single, more expensive unit in a project is the appreciation opportunity associated with this type of investment.

    Dubai Real Estate

    There are many universally indisputable fundamentals that form a clear answer to our questions above, such as:
     

       Prime units

       Least attractive Units

       Higher price (8%-20% higher off-plan)

       Lower Price (8-20% cheaper off-plan)

       Low supply & often high demand

      High supply & often fair demand

       High liquidity (Even during the most severe downturns)

       Less Liquid (When markets get tough, these are the last units to go)

       Lower risk driven by the low supply and the consistent liquid market position

       Higher risk driven by over-supply/less demand

       Potentially higher profit

       Always less profit

     

    In addition to the above and particularly in Dubai when buying an off-plan apartment or even an office space in a prime area such as Downtown, all Waterfront developments and Citywalk or when buying an off-plan villa in almost any Dubai villa community, choosing to purchase the most prime unit/s is essential.

    The Dubai off-plan property market in the last 10 years has revealed that the price difference between the most attractive units and the least attractive units ranges between 8% and 20 % depending on the development. However, once the project is complete, the most prime units achieve a premium of anywhere between 40% and 100%. Here are some examples:

       Project Name

       The Most Attractive Unit

       The Least Attractive Unit

       The Address hotel, Downtown

       Full fountain & Burj  Khalifa view:     AED 4500 to 7500 / sqft

         Back side, low floor,
         Dubai mall roof top view:
           AED 2500 to 3500/sqft

       JBR

        Full Sea view: AED 1500 to    1800/sq.ft

     Blocked building view, low floor:
    AED 900 to 1000 / sqft

       The Residences, Downtown

       Full fountain & Burj  Khalifa view:    AED 3000 to 3300/sq.ft

     Back side, blocked building view, low    floor: AED 1800 to 2000/sq.ft


    As you may have realized, while the difference in price between the least attractive unit and the most attractive unit is 8% to 20% at the first instance of release (off-plan), this premium climb to reach between 50% to even over 100% in some cases, where the entry price was low.

    The above however does not rule out investing in other fairly positioned units of a development, but if given the opportunity to leverage on the above and gain much higher income, it is preferable.

    To conclude, most prime units are always very limited in supply and are thus far more liquid during market fluctuations. For example, corner villas in a development can amount to as little as ten to fifteen percent. Likewise, in a mega project like the Residences in Downtown, apartments with a full Burj Khalifa and Fountain view make up just fifteen percent if not less. Markets are often governed by the power of demand and supply making prime units in a project a much more secure investment. (read more on the myth of Demand and Supply of Dubai Real Estate Market).

    The above leads us to another important fact, is that to achieve the maximum benefit from the above mentioned, investors shall hand pick their real estate advisors who:

    1. Have a fundamental approach to real estate, rather than sales people purely driven by the commission paid when selling a project.
       
    2. Who consistently watch, analyze and understand the market dynamics. Which allow them to have the ability and experience to advise on the right units.
       
    3. Agents who are very well penetrated in the market; who are ahead of others and have unique exposure to newly launched projects which in turn means they can secure early access to prime units. Prime units always gets sold first.

    Written by:

    Firas Al Msaddi

    CEO - fam Properties




    1k


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