With both foreign and local investors displaying more caution than usual, an active off-plan market – which has been known to drive up real estate prices – is expected to slow down, says Dommett.
Investors who buy up property and quickly resell for a profit, otherwise known as “flipping”, have not only been discouraged by the global economic uncertainty, but by recent government action taken to limit the practice.
It is widely believed that a decrease in flipping will not only help stabilize property prices, but ease the demand for the off-plan market, igniting a trend that would ultimately encourage more end users to enter the market.
End users are already less likely to buy off plan as they typically need a place to live or to generate rental income to support mortgage payments, and are often wary of the return of their investment.
“End users are realizing that there is very little price differential between off-plan and completed properties, and they would prefer to buy something that is ready to move in to,” commented Dommett. “For investors and speculators however, the attraction of off-plan lies in the lower initial cost.”
Financing is also generally more difficult for off-plan buyers as the banks are increasingly reluctant to lend against a property that has yet to be built, he added.
Overall, concerns about the state of the global economy have prompted a new wave of property buyers in the UAE who are more cautious than usual, demanding more value for their money and foregoing short term gains in favor of longer-term stability.
The likely result, says Dommett, is to ultimately have a stable end user market that is conducive to mortgages.
“The fewer speculators there are in the market, the more favourable market conditions will be for end users looking to buy their own home. This ultimately creates more opportunities for the UAE’s mortgage industry.”
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Thursday, October 16- 2008 @ 2:02 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.