UAE Property: Should You Buy an Off-Plan or Ready Unit in Dubai?
Question: I’m planning to buy a property to live in Dubai, but I’m stuck between buying an off-plan or a secondary market unit.
I’ve heard that off-plan properties are cheaper and may benefit from capital appreciation. However, I’d need to pay both rent and the construction-linked payment milestones until the property is ready.
On the other hand, if I buy a secondary market unit, I’d need to pay a 20% down payment upfront and cover additional fees, but I’ll have the property immediately.
What should I keep in mind when choosing between these two options? Should I inquire about service charges before buying? What other factors should I consider?
Answer: Choosing between an off-plan or secondary market property in Dubai depends on several factors, each with its own pros and cons. Let’s break it down to help you make an informed decision.
Secondary Market (Ready-to-Move-In Properties)
Pros:
- No Construction Delays: You’ll avoid any construction delays, and what you see during the viewing is exactly what you get.
- Immediate Possession: You get the keys to your property right after the transfer, which means you can move in or start renting it out immediately.
- Steady Rental Income: If you plan to rent out the property, you can start earning rental income right away.
Cons:
- Premium Pricing: Secondary market properties might come at a premium, as sellers typically factor in the convenience of immediate possession.
- Slower Capital Appreciation: Properties in established areas tend to appreciate at a slower pace compared to new developments.
- High Upfront Costs: You’ll need to pay the full 20% down payment, plus associated fees, right away, which could put a strain on your finances.
Off-Plan Properties
Pros:
- Lower Initial Investment: With an off-plan property, you only need a 10% to 20% down payment, followed by construction-linked payment milestones. This can make it more affordable initially.
- Capital Appreciation Potential: In a rising market, off-plan properties often appreciate quickly, especially as they near completion.
- Brand-New Features: Off-plan properties come with the latest designs, features, and technology, which can enhance long-term value.
Cons:
- Construction Delays: Delays in the handover are common, sometimes taking up to 12 months. This could disrupt your plans to move in or start earning rental income.
- Uncertainty About the Final Product: While developers promise certain features, there can be discrepancies in size, views, and facilities when the property is finally handed over.
- Market Oversupply at Handover: If many units in the development are completed at the same time, it could affect rental demand and value.
Factors to Consider for Resale Value:
When buying a property for resale or rental potential, location is key. People are typically drawn to properties near water features (like marinas and beaches) or major attractions with good transport links (such as metro stations). The property’s location directly impacts its future resale and rental value.
Service Charges:
Service charges are an ongoing cost you’ll need to consider. These can range from Dh2 to Dh5 per square foot for villas and townhouses, and Dh15 to Dh20 per square foot for apartments. While service charges are typically annual, they could be billed quarterly or monthly depending on the developer or owners’ association. It’s crucial to ask about this before purchasing, as they’ll affect your monthly budget.
Other Considerations:
Market Trends: Dubai’s property market is currently experiencing a strong bullish phase, driven by factors like population growth. However, markets can be influenced by external factors such as government policy or global events, so buying real estate should be viewed as a long-term investment.
Mortgage Availability: Mortgage options can differ for off-plan and secondary market properties. Ensure you check early on to understand the financing options available to you.
Final Thoughts:
Choosing between an off-plan or secondary market property boils down to your financial flexibility and long-term plans. If you want immediate possession and a more predictable experience, the secondary market may be ideal. However, if you’re willing to wait for construction and are looking for lower initial investment costs, off-plan properties could offer significant capital appreciation.
Consider your financial situation, investment goals, and the current market dynamics before making your decision.
Source: The National News
