Novice property buyers hunting for bargains on Dubai’s off-plan residential market are being duped by misleading offers, a UAE real-estate expert has warned.
Firas Al Msaddi, the chief executive of fäm Properties, said yesterday that properties in prime areas are often advertised by developers as having "the best" or "the lowest" price – something that lures in investors focused on price rather than the liveability of the home.
“The ads are misleading,” said Mr Al Msaddi, “because they are implying that they are the cheapest; but ask a property agent to evaluate the offer for you and they will tell you otherwise.”
Mr Al Msaddi said inexperienced investors can be caught out by the low sale price for the unit in comparison to other properties in the area, and forget to assess the price per square foot.
“The ad will claim these are the lowest prices in Business Bay, for example, but they are only the lowest because the units are squeezed. When you look at the price per square foot it is actually higher than the average for the area."
“If someone has been buying and selling for the last five years, they would figure it out, but the inexperienced investors don’t pay attention to this.”
Mr Al Msaddi says his brokerage has heard from many people selling at a loss because they fell for the offers and then could not let out the space at the rate they wanted.
He said this is particularly the case in prime areas like Downtown Dubai, where the vast majority of end users are GCC citizens, other Arabs and Indians who demand spacious two, three and four-bedroom homes.
“They buy off-plan and when it’s complete the whole evaluation shifts from being something on paper to the real thing,” he said, adding that purchase decisions in prime locations should be based on what end users see when they visit ready properties.
Mr Al Msaddi said he has seen off-plan two bedroom apartments in the area priced as low as Dh1.6 million to Dh1.8m – in comparison to the average for the area of between Dh2.5m and Dh2.8m.
“The brochures are nice and colourful, but the buyer does not visualise how small the apartment is until it’s too late. Once the property is handed over, no one cares about the price you purchased at, it’s all about whether it’s attractive to end users or not."
The warning comes amid a boom in Dubai residential off-plan sales. Properfinder.ae, a listings portal, said off-plan sales are expected to continue until the end of the year as low-deposit speculators take advantage of increasingly generous payment plans and a greater choice of projects.
The firm said that cheaper homes and lower deposit requirements were driving investors towards off-plan deals. Despite median prices for home falling by 20 per cent between November 2015 and April 2017, the lower prices have not affected developers’ off-plan sales, said propertyfinder.ae.
Simon Kennedy, managing director of the property broker Edwards & Towers, said his firm had not experienced any mis-selling by developers – particularly since the Land Department tightened regulations governing off-plan sales.
“I haven’t seen any evidence of misleading offers,” he said. Instead he said off-plan buyers have better options.
“Select properties has just relaunched a few units in Marine Gate 1 in Dubai Marina where the investor pays 10 per cent now, 30 per cent on completion and 60 per cent on a two-year quarterly payment post-completion,” he said.
“If you are exposing a lot of money during the construction, that’s when the risk starts to pile up, but [if] you are only exposing 30 per cent then you are quite de-risked.”
However, for those that are misled by agents, Mr Kennedy said buyers must fully research pricing by cross-checking what the developers are offering with what’s listed on the resale market through portals such as dubizzle and propertyfinder.ae.
Mr Al Msaddi said investors should adopt a two-step process when considering a purchase to protect their investment.
“First look at the price per square foot and at the tag price – both have to within the average for that area," he said. "Next, look at the liveability of the apartment and the size of the rooms.
“There’s a lesson here for both investors and end users who need to evaluate a property in the context of expected end user demand once the project is completed. This can be measured in terms of the property’s liveability offering – the amount of space and comfort – combined with the individuality and unique nature of the development and the overall market supply factor.”
Both Emaar properties and Damac Properties have reported higher sales in the first quarter of 2017 – Emaar booked deals worth Dh6.05 billion in the first quarter – a 44 per cent year-on-year increase while Damac sold properties worth Dh2.2bn – up 11 per cent year-on-year.