The real estate market in the capital of the Emirates operates more within the local context compared to Dubai’s market. A significant majority of transactions are carried out by Emiratis and GCC nationals. This characteristic makes the property market in Abu Dhabi relatively more insulated against foreign outbound investment.
Recent legislation has introduced additional free investment zones throughout the city. These zones allow non-GCC nationals to purchase properties and attain full ownership rights. This development took effect last year. Coupled with the new long-term visa system launched in 2019, these changes expand the opportunities within the diverse property market to international investors. In the past, foreigners primarily engaged in leasing vacation homes under a leasehold arrangement. However, they now have the freedom to select from a comprehensive range of residential, commercial, and industrial properties for investments aimed at enhancing value. The residential market in Abu Dhabi caters to a diverse spectrum, offering homes to suit budgets ranging from AED 500,000 to AED 90 million.
If a foreign individual is considering property acquisition in Abu Dhabi, a decision must be made between investing in off-plan Dubai or opting for the secondary market. Let me walk you through the pros and cons of both the markets so you know what is off-plan property and secondary property exactly, and have an ample understanding of the UAE market.
Pros & Cons of Off-Plan Market
Cutting-Edge Designs and Amenities
Opting for an off-plan property ensures access to the latest and most innovative designs and amenities. However, the appeal extends beyond aesthetics, encompassing several financial advantages inherent in the off-plan property market.
Lower Market Price
A significant perk of off-plan property purchases is their often lower cost compared to prevailing market prices. This is attributed to developers frequently providing discounts and attractive deals, maximizing the value you receive for your investment.
Developer Incentives and Flexible Payments
Certain developers go a step further by covering specific legal expenses, such as the 4% Dubai Land Department fee, bolstering the financial allure. Moreover, Off-plan Market commonly offer flexible payment plans, adding to their appeal.
Higher Return on Investment
These factors collectively contribute to Off-plan Market demonstrating robust capital appreciation, even prior to project completion. Essentially, capitalizing on these financial incentives enables purchasing at a reduced rate and eventually selling at a significantly higher price, translating to substantial profits. Consequently, primary and off-plan properties in Dubai emerge as appealing investment prospects.
Minimal Refurbishment Costs
A noteworthy advantage of Off-plan Market lies in their newness, obviating the need for extensive refurbishments, which typically entail considerable expenses.
The current demand for Off-plan Market often surpasses their supply, resulting in swift sellouts shortly after developers introduce them to the market. The challenge in acquiring off-plan units lies in the necessity to act promptly.
Risk of Project Abandonment
There exists a marginal risk associated with purchasing off-plan properties, as developers might abandon projects in the event of financial hardships. Nevertheless, regulatory bodies like the Dubai Land Department (DLD) and Real Estate Regulatory Agency (RERA) have established stringent measures to safeguard the interests of off-plan property buyers. For instance, developers are mandated to deposit 20% of the project’s cost into an escrow account, ensuring sufficient funds for project completion.
Potential Discrepancies in Delivery
Especially in the context of off-plan units, the final product might not align with initial expectations until construction culminates. Consequently, there’s a risk of reality falling short of the enticing 3D models showcased by the developer.
Dependence on Developer Reputation
To mitigate the risk of disappointing deliveries, it’s imperative to exclusively engage with well-established developers with a commendable track record of consistently delivering high-quality projects punctually.
Pros & Cons of Secondary Market:
Stable Unit and Location
Secondary properties are those that are already built and situated in established neighborhoods. This provides you with a clearer understanding of what it’s like to live there – from the upkeep of the property and available amenities to your potential neighbors.
Range of Options
Unlike the fast-paced off-plan market where properties are quickly sold out, the secondary market offers a broader range of options. This extra time can give you more flexibility to make your decision.
While you won’t have access to the special offers developers provide, secondary properties might still be more budget-friendly compared to brand-new units. A skilled real estate agent can help you negotiate the price, ensuring you receive good value.
One drawback of purchasing a property that was previously occupied or leased is the potential need for renovations. The extent of these renovations depends on how old the property is and how well it was maintained by its previous occupants, For properties older than a decade, it’s wise to budget for possible repairs.
Depending on how long the property has been available, you might not find the most up-to-date and modern designs. This is something to consider, especially if having a cutting-edge appearance is important to you.
Limited Payment Plan Flexibility
Unlike the off-plan market, where developers often offer flexible payment plans, the secondary market typically lacks these options.
In weighing the pros and cons of the off-plan and secondary property markets in the UAE, it’s clear that each option has its advantages and drawbacks. The off-plan market offers potential cost savings and customization but involves uncertainty, while the secondary market provides immediate ownership and clearer insights but might require higher investment. Most importantly, choosing between the two totally depends on individual’s preferences, risk tolerance, and goals.