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The Dangerous Share of Off-Plan Properties in Dubai

Updated: May 14, 2023

When you buy an apartment or house, you have the choice between a ready (completed) property), or an (unfinished) off-plan property.

Off-plan properties are real estate that is being sold to investors "off the (building) plan". You are essentially buying a property that will get completed in several years time.

Of course, if you are looking for a place to reside in right away, you will prefer a ready property.

Off-plan properties are primarily bought by investors who intend to flip them once they are ready for a profit, or rent them out afterward. It is less common for investors to move into an off-plan property they purchased.

Dubai has always had a very strong off-plan market. However, the current market boom as of 2023 has led to new heights both in the number of off-plan property launches, as well as the share of off-plan properties as part of the overall housing market.

According to data from the Dubai Land Department, the government authority responsible for registering property sales, 2022 saw a new record high for off-plan sales.

In fact, in 2022, the total number of off-plan sales stood at 52,000 units, exceeding the more typical number of annual off-plan sales of around 20,000 units per year. Similarly, the total number of off-plan sales exceeded the number of ready apartments being sold.

In 2022, off-plan sales made up 56% of all property sales that year.

Looking at total value, rather than the number of off-plan sales, we see an even more pronounced trend. 2022 saw an incredible AED 125 billion in off-plan sales, or USD 34 billion.

This number is 5 times greater than the long-term average of around AED 25 billion in annual off-plan sales.

Why are off-plan sales measured in terms of value even larger? Most property launches nowadays are in the premium and high-end sectors, while a few years ago most launches were average-priced middle-class properties.

We are seeing a potential oversupply risk given the sheer number of off-plan sales, along with their record-high share of the total real estate market.

We need to keep in mind that off-plan properties will end up as ready-built properties in just a few years' time.

The people investing in off-plan real estate already live somewhere, whether that be in Dubai or abroad.

In just a couple of years, we will see massive new supply of primarily luxury residences, and if they are supposed to earn a return, they need tenants or occupants.

The good news is that off-plan property sales are concentrated in a few Dubai neighborhoods. Most of these off-plan properties are in the high-end luxury sector.

As a result, any oversupply of properties will be limited to certain neighborhoods and certain property types.

Even in today’s market, there are relatively undervalued properties to be found. Here at The Dubai Navigator, we use cash flow analysis and predictive trend analysis to identify which properties will likely outperform the market in the long term.

There is more good news: Dubai’s population is continuously rising, and in 2022 alone, more than 4,000 millionaires migrated to the United Arab Emirates from abroad.

That means that more millionaires moved to Dubai than to the US and Canada combined.

The long-term sustainability of Dubai’s current property prices, especially in the luxury segment, strongly depends on the continuation of this millionaire migration trend.

Our strategy consulting firm The Dubai Navigator does not sell properties. Instead, we develop tax- and return-optimized property investment strategies for our clients. View our property strategy services here.


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