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Putting a clip on new offplan launches in Dubai

Gulf News 2019-09-11 15:12:14

Dubai: Private developers in Dubai have hit the brake on new launches, hoping that this way they would be able to stave off some of the oversupply concerns in the property market. In the first nine months, these developers launched a combined 2,314 new units, which represents just 26 per cent of the overall releases done this year.

That compares with their share of 64 per cent for the same period last year, when they released 14,043 units out of 21,321 launched between January to end August. The comparisons with 2017 are even more stark - private developers had a 74 per cent share of launches. And in 2016, it peaked at 81 per cent, according to date supplied by Reidin-GCP.

So, what’s bringing this about? The answer lies in the number of new homes being delivered in Dubai. “The Dubai property market could see a record number of completions by year-end,” said Sameer Lakhani, Managing Director at Global Capital Partners. “If more than a quarter of these completed homes don’t have a buyer by then, it could build up the demand-supply mismatch.”

Numbers point to a looming worry

In the year to August 14,999 new homes have been completed, with private players making up 85 per cent - 12,788 units - of these. In fact, in each of the last two years, the private players have had a hand in more than 80 per cent of the deliveries. In 2016, their share dipped to 71 per cent, but that was after a whopping 92 per cent share in 2015, Reidin-GCP numbers show.

Over the last two years, more than 57,000 homes were added to Dubai’s existing base. So, what could be the final year’s tally? Most market watchers are putting their money at around the 30,000 mark, insisting that it is unlikely that the total would shoot up anywhere over 45,000-50,000 units.

There is no clear data on the number of delivered units that are still unsold from the last three years. But there will be one detail that will worry developers of all sizes - as per UAE laws, VAT (value added tax) will come into effect on all unsold property of three years and older left with a developer. (Currently, all residential property sales are rated at 0 per cent.)

Government-owned developers

As private developers brought down their launches, government-owned ones have kept the supply pipeline flowing smoothly. Emaar, Meraas and Dubai Holding have all managed to tap into buyer interest, with launches such as Emaar Beachfront (in Jumeirah), Cherrywoods (on Al Qudra Road), and Madinat Jumeirah Living (near the Burj Al Arab and other Dubai icons) being the biggest beneficiaries. (Dubai Holding definitely set the bar high on endorsements, signing up Cristiano Ronaldo, to put some serious celebrity heat into its commercials.) “The only way private developers can compete with government owned ones seems to be through post-handover plans,” said Lakhani. “But with government developers offering their own post-handover schemes, it’s a tough fight out there.

“Whether ready or offplan, where post-handover plans exist, the offtake has been high as evidenced at Jumeirah Village Circle. The problem, however, is that the vast majority of private developers have not been able to compete effectively - hence the reduced number of launches.

“From a buyer’s perspective, it’s even cheaper cashflow-wise to buy an apartment rather than a car, based on the monthly outgo for each.”