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Dubai’s mid-market property sales next to flourish, says Damac

City, Cityscape, Urban Supplied
The ultra-luxurious Cavalli Couture complex is Damac's most recent launch
  • Executive predicts housing boom likely to continue for two years
  • More end-users buying instead of investors
  • Fewer defaults on payment from speculators

This has been a record year for Damac Properties, with sales up 100 percent, and a senior executive predicts the current Dubai boom will continue for at least another 18-24 months.

The company’s most recent launch was Cavalli Couture, described as an ultra-luxury branded project along the Dubai Canal, with interiors designed by the Italian fashion designer’s firm and inspired by the Amazon jungle. 

While the developer is renowned for these top-end homes, Ali Hussain Sajwani, managing director of operations and technology, said the demographic of buyers has changed over the last two years.

“Since the luxury market has been booming, everyone has been focusing on launching luxury products,” Sajwani said. “People have forgotten the mid-segment: we now expect to see the mid-segment really boom.”

Damac’s refocus of attention is in keeping with the second phase of the Dubai 2040 Urban Master Plan, which was launched by the government on Monday and predicts that the emirate’s population will hit 5.8 million by 2040, from 3.3 million today.

Sales of off-plan and secondary properties in Dubai reached a 12-year high in the third quarter of this year, both in terms of volume and value, according to a report by Property Finder.

A total of 25,456 sales transactions worth AED69.72 billion ($18.98 billion) were recorded from July to September, marking an increase of 62 percent in volume and more than 65 percent in value, compared with the third quarter of 2021.

“There are a few key differences this time around compared to the previous booms,” Sajwani said, adding that the number of investors looking for a quick return, and in some cases defaulting because they were unable to resell the home before payments were due, has decreased considerably.

“We used to see around 30 percent defaults. What does that mean? If we launch a project today, usually the customer just pays a reservation fee, he pays 5 percent.

“And what used to happen is he takes this unit, where he’s paid 5 percent, and it’s sold out, and he goes and tries to sell it the next day. So, if he makes 10 percent, he’s more than doubled his money. We call them the speculators.

“But 30 percent of [these] sales ended up defaulting in the first few months, [meaning we would] have to resell. Those unit [sale defaults] are below 7 percent right now.”

Ali Hussain Sajwani, Damac’s managing director of operations and technology

Another change has been the end of delayed payment plans that catered directly to the speculators, which Sajwani described as “extravagant”. 

“Now, all the developers are pushing for 5 percent on booking and at least 20 percent in the first three months,” he said. “So you know that the end user is actually someone who has the liquidity to do the purchase.”

Damac’s parent company was set up 40 years ago, with the property division established in 2002. While Dubai was previously known as a magnet for real estate speculators, Sajwani said this has now changed and the majority of buyers are homeowners.

“Historically, [the] majority were investors. This time around is different. [The] majority are end users – the dynamic has shifted in the last two years,” he said.

A report in October by Betterhomes found that surging rental rates and expats opting to live in the UAE longer has meant the demographics of buyers is changing, with 45 percent of sales going to end-users, compared to 36 percent in the previous quarter.

John Lyons, managing director of Espace Real Estate, which has sold and leased properties across 54 Dubai communities since 2009, echoed Sajwani’s observations.

“We have experienced an increase in demand from end-users,” Lyons said. “This is a very healthy sign for the market as people buying property for personal use creates greater stability. 

“Previous cycles in Dubai have seen high levels of demand from property speculators which can make the market unstable during a market downturn.

“Genuine end-user demand provides more market stability than speculative investor-led demand.”

Damac Properties has built 42,000 homes since 1982 and currently has another 28,000 in planning and development.

“We have more products which we will be launching in the coming six months,” Sajwani said. “Most of them are under design at the moment, we believe this market has at least another 18 to 24 months.”

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