A recent study found that an increasing proportion of Dubai real estate buyers are flipping the homes they purchased off-plan in an effort to maximise their return on investment.
The latest trend, which is reminiscent of the previous market cycle where property investors were flipping their purchase deals for a quick profit, needs to be closely watched to rule out any possibility of a bubble bursting, Property Monitor said in its new report.
As of November 2022, total resale transactions in the emirate went up by 3.2% to 4,425, representing a market share of nearly half (43.4%), according to Property Monitor. The resales transactions refer to any subsequent sale of a property (off-plan or completed) that follows the initial first-time sale from the developer.
A growing portion (18.8%) of the jump in resale activity can be attributed to secondary sales of off-plan properties, the report said. “The initial buyers, in most cases, are cashing out with a premium in hand. This may seem reminiscent of a trend which occurred in the previous market cycle where flipping and speculation towards short-term gains was rampant,” Property Monitor said.
“However, at this stage, anecdotal evidence points to fortunate buyers who were presented with unplanned opportunities for a windfall and not premeditated speculative purchases.”
“In any event, the volume of off-plan resales is an area to be closely monitored in the coming months and any significant uptick viewed as a cautionary market signal of a bubble bursting.”
Strong demand
Dubai’s property market continues to attract huge demand, with total sales in November reaching 10,188. Year-to-date deals stood at 87,426, representing 142.6% of the entire annual transaction volume last year.
At the current pace, sales transaction volumes for 2022 are likely to reach more than 95,000, recording the second-highest year “ever witnessed in Dubai market history”, according to the report.
However, property price growth moderated slightly last month, recording a 1.06% month-on-month increase in November. Properties in Dubai cost AED1,076 per square foot, on average, now back to a level not seen since November-December 2013 when the market was “in the throes of a string upswing,” Property Monitor said.
“Dubai now looks like a strong outlier in world markets, with North American, European and other developed markets showing price drops despite the inflationary pressures on energy, traded goods and food prices and strongly rising interest rates,” the report said.
