Why are off-plan developers pricing their properties so aggressively in Dubai?

A very common phrase we have been hearing around Dubai’s property market is that while demand continues to soar, supply around town for new properties is running dry.?

With a new increase in population numbers, better investor benefits, higher ROI’s, a growing rate of prices for properties and easily accessible international purchases, everyone in the world is looking to capitalise on Dubai’s property market and its elusive benefits.

Although, according to Dubai Land Department’s data, the secondary market currently dominates the real estate landscape, constituting 63% of the total value of sales transactions, while off-plan properties make up 37% in this past Q3 of 2023.

This comes as a surprise to many as off-plan developers are actively pricing their properties more aggressively, leaving many to wonder why?

The answer to this intriguing question lies in the dynamic shifts occurring in Dubai's real estate sector. As the demand for luxury properties continues to skyrocket, property developers are changing their strategies actively to cater to the evolving needs of investors and homebuyers. Their focus now centres on creating properties that exude quality and status, naturally driving prices higher than traditional market expectations.

One undeniable sign of these changing dynamics is the surging liquidity in the market. This empowers developers to command higher upfront payments. With a growing number of buyers able to afford these upfront costs, developers are guaranteed to price their properties more aggressively, as they are certain buyers will pay this amount.

Developers are now keenly attuned to market responses and are quickly adapting to the demands. Recent property launches, such as Palm Jebel Ali and DIFC Living, are a testament to the market's receptiveness, with properties selling out within mere minutes.?

Buyers seem undeterred by heftier price tags, substantial 20-30% down payments, and extended project timelines that often span two to four years – far longer than the renovation process of an existing property.

To comprehend the magnitude of this transformation, let's compare property prices from 2021 with those of 2023, revealing a notable 25% increase. In 2021, the average price per square foot was AED 1,539, but in 2023, it has surged to AED 1,937. A striking example is the premium community of Mohammed Bin Rashid City, District One, which saw its average price per square foot rise from AED 1,297 in 2021 to the current AED 1,787 – a substantial 38% increase in just two years.

Surprisingly, Allsopp & Allsopp's first-party data also unveils a remarkable insight. In the third quarter of this year, 64% of the properties purchased were under the AED 3 million mark. This data signifies that a majority of buyers in the market are still inclined toward more affordable properties. Despite the market appearing to favour property owners and developers, it is evident that buyers, regardless of the price range, are eager to participate in Dubai's property market. This eagerness prevails, particularly in light of the numerous new developments that are swiftly selling out, reaffirming Dubai's continued allure to investors and property enthusiasts alike.

“Developers are recognizing the increasing demand and liquidity in the market, which allows them to price their properties more aggressively. Despite rising rates, international investors are flocking to Dubai, indicating a promising future for developers. The key now is to ensure that Dubai remains a market where luxury and accessibility coexist." - Carl Allsopp ; COO, Allsopp & Allsopp Group.

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Ultra rich Chinese and Russian investors flock to Dubai’s property market!

As geopolitical tensions rise in both these countries, many investors have chosen to safeguard their investments, flock to Dubai and capitalise on Dubai’s property market.

According to Sergei Rakov , Head of Technology at? Allsopp & Allsopp, Russians and Chinese investors have been especially active buyers of Dubai property, with transaction volumes increasing significantly since last year.

This influx has driven strong price appreciation in Dubai’s luxury segments. Al Barrari saw property deals at its investment locations increase 400 percent, with its clientele coming primarily from ultra-wealthy buyers.

On the other hand, Russians have increasingly turned to short-term rentals as well.

“The surge in Russian tourists seeking short-term rentals in Dubai commenced even before the onset of the pandemic. From my professional experience, dating back to October 2019, it became evident that a substantial portion, approximately 80 percent, of our clientele, hailed from Russia – based on my previous company,” said Sheena Arila , Head of Holiday Homes at Allsopp & Allsopp.

Their preference for Dubai as a travel destination stemmed from the region’s favourable climate and numerous attractions.

In 2022, the pronounced demand for short-term rentals was primarily attributed to Russian tourists. Aside from the demand brought on by the FIFA World Cup during Q4 last year, this rise in bookings by Russian visitors was mainly due to the ongoing geopolitical tensions with Ukraine. In the past year, approximately 45% of Allsopp & Allsopp’s Holiday Homes bookings were attributed to Russian tourists, and this trend appears to persist, as evidenced by our current bookings.

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Data Hub now shares property insights for up to 180 days!?

In case you missed it, earlier this year Allsopp & Allsopp quite literally broke the internet with the launch of our Data Hub tool.?

Ever been curious to know how much your friends pay for rent? Or if Sally at the office real;y got a great deal on her property??

With Data Hub, you could check any community, area and tower to find out the transactions that have taken place over the last 180 days!?

Not just that, you could filter your search down to type of property, bedrooms, sales or lettings, area, community or tower and get a refined update directly through the Dubai Land Department.?

Need a tutorial??

Let our Head of Digital Marketing; Alexander Lea , break it all down for you!

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And don’t forget to check out The Ampersand, our weekly newsletter that dives into Dubai’s property market and beyond.?

Stay tuned for more updates and insights as we continue to monitor and interpret Dubai's dynamic property market. These data points help with scheduling the future perspective for unlocking insights into Dubai’s real estate market.?