The boom in Dubai's residential off-plan sales will continue at least until the year-end as buyers take advantage of less onerous payment plans and a greater choice of projects, said Propertyfinder Group, a leading real estate listings portal in the Middle East.

Exclusive Propertyfinder data shows median residential prices in Dubai fell 20 per cent from November 2015 to April 2017, extending a slump that began two years earlier as the strong dollar and weak oil prices weighed on investor sentiment.

Those headwinds have done little to blow developers’ sales off course this year, however, with Emaar Properties and Damac Properties – the two major developers to publish detailed information – reporting a transaction boom in the first quarter of 2017.

“Since December 2013, expat buyer of completed properties must put down a cash deposit of at least 25 per cent and they also need a minimum extra 6 per cent to cover the various fees,” remarked Propertyfinder Group CCO Lukman Hajje.

“That’s a large amount of money and it’s forcing many potential purchasers away from the completed property market to off-plan where developers are enticing them with low upfront and even back-ended payment plans,” he said.

Emaar sold Dh6.05 billion ($1.65 billion) of Dubai property in Q1 - up 44 per cent from a year earlier – as it launched seven projects totaling 2,923 units in the emirate.

Rival Damac, Dubai’s largest privately-controlled developer, booked Q1 off-plan sales worth Dh2.2 billion, up 11 per cent year-on-year and 29 per cent higher than in the final quarter of 2016.

Off-plan properties are discounted relative to completed units and accounted for about half of all Dubai residential property deals in 2015-2016, according to Reidin.

“In theory, buying off-plan allows investors to take advantage of historically low Dubai property prices for a very low cost and a get a foothold in the market, but this strategy does not come without risk,” noted Hajje.

“Projects are often delayed and buyers have little option but to wait. Also, the finished product may not be what they expected - glossy brochures can look amazing but market conditions and political or economic situations change, as do the price and availability of certain materials. All these can impact what’s eventually delivered,” he added.

As market leader, Emaar demands some of the toughest off-plan payment schedules. For example, an investor in Downtown Views II must pay 70 per cent of the unit cost during construction, with the final 30 per cent due upon completion, scheduled for December 2020.

Other major developers offer a little more leeway. Damac’s Casablanca Villas, part of AKOYA Oxygen, and launched in May, allows buyers to pay 60 per cent of their property’s cost upon completion, as does Dubai Properties’ Mudon Views, with one-bedroom apartments starting from Dh766,000, explained Hajje.

But it’s the smaller companies that promise the best terms of all. For example, Danube’s Bayz, a 29-storey residential tower in Business Bay, requires payments totaling 25 per cent in the first 120 days, he added.

Then from October 2017, buyers pay 1 per cent a month to December 2023. GGICO’s Topaz Premium Residences in Silicon Oasis allows for 30 per cent payment up to handover, with the remaining 70 per cent paid over three years following completion.

Hajje cautioned potential buyers to be aware of potential difficulties in securing financing.

“Except for those who plan to pay 100 per cent in cash, most off plan buyers will eventually require a mortgage,” he added. “And just because you may be eligible for a mortgage today doesn’t mean you'll qualify in the future, particularly if your employment circumstances or lending criteria change,” he said.

Nevertheless, consultants Cluttons predict Dubai’s off-plan market will remain upbeat despite predicting in a recent report that sales prices will fall a further 5 per cent correction.

“The emergence of favourable payment plans continues to tempt buyers and perhaps investors to a greater extent,” Cluttons wrote.

"That outlook is partly due to many banks now offering some sort of under-construction financing, although this is mostly limited to a specific list of developers on which the lender has completed due diligence. Unsurprisingly, banks favor the master developers such as Emaar over independent sub-developers," said Warren Philliskirk, the director of Propertyfinder subsidiary mortgagefinder.ae.

Banks are also more willing to lend the closer to completion a project gets - at final payment and hand over stage, banks that weren’t financing during construction become involved because the risk is lower, he stated.

“This doesn’t mean every bank will finance at this stage - some are still very reserved until title deeds are available, which can be 3-6 months after handover,” noted Philliskirk.

"Our business is going strong and we have had back-to-back record months recently so we’re confident demand for quality end user property will continue," he added.-TradeArabia News Service