New or resale property: which apartment to choose in Dubai?

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New or resale property: which apartment to choose in Dubai?

Many first-time investors are thinking about what is more profitable: buying a second-hand home in Dubai or a newly built property and whether it is worth buying off-plan property?

The Dubai real estate market is actively growing. For instance, in September alone, 8,651 purchase and sale transactions were recorded in the emirate, which is 49.5% more than in September 2021. Of these, 4,917 transactions were for off-plan real estate, and 3,734 for move-in ready housing. The growth rate for the year was 88.5% and 17.5%, respectively. Thus, we see that investors are interested in both types of real estate, while the popularity of properties in new projects is growing.

This is not surprising as Dubai developers are constantly rolling out new properties designed to attract buyers with unusual architecture, access to premium amenities and lucrative payment plans. In the first half of 2022, they launched 67 projects with 130,000 housing units. Growing home sales show that demand for real estate in the emirate remains consistently high.

Resale housing in Dubai is a considerable share in the market, amounting to 30-40%. Professional brokers say that this indicates a healthy balance of supply and demand.

Each type of real estate has its own advantages and disadvantages, which can be important for a particular investor. The financial situation and priorities of each buyer are also unique. To make a reasonable choice, it is necessary to clearly understand the specifics of both primary and secondary real estate.

The main thing when choosing a place to live

In order to choose a property in Dubai that will meet your requirements, you need to decide on the main parameters of the future property, including:

its budget;
the area and floor plan of the property;
its location;
amenities and the infrastructure;
additional costs that the property requires.

Budget for buying real estate

Prices in Dubai allow investors with different incomes to choose a worthy option. Real estate under construction can be 20% cheaper than finished, but you should keep in mind that off-plan prices in Dubai are now actively growing. In addition, developers are choosing to launch projects in more expensive areas.

The average cost of one-bedroom off-plan apartments in the first half of 2022 increased by 46% compared to last year and amounted to AED 1.2 million ($326,500), while the cost of a finished apartment increased by 14% to AED 1.1 million ($299,500).

Prices for resale real estate, as a rule, are 10-30% lower than for housing in finished new projects. Villas are still more expensive. According to the statistics for the first half of the year, the average cost of an off-plan villa was AED 1.7 million ($463,000), which is 9.6% more than a year ago. The average price of a finished villa reaches AED 2.6 million ($708,000), showing an increase of 6% over the first half of the year.

Housing location

Dubai has many neighborhoods that offer a wide variety of lifestyles, from the business-oriented Downtown Dubai and the high-rise waterfront resort of Palm Jumeirah to the family-friendly community in the natural Dubai Hills.

When choosing a property, whether it is a newly built or secondary housing, it is important to take into account its transport accessibility, the quality of external and internal infrastructure: shops, sports facilities, recreational venues and sightseeing spots, educational and medical institutions.

An important factor is the proximity to water. In addition, you should pay attention to the rules of a particular community: for example, whether pets are allowed, if there are walking areas, etc.

Some of the most popular destinations in Dubai include:

In September, real estate in these communities was in the highest demand. Areas such as Downtown Dubai, Jumeirah Lakes Towers (JLT), Al Barsha, Jabel Ali, Arabian Ranches and many others are also very popular.

Additional renovation costs

New real estate in Dubai is sold with interior finishing, often fully furnished. Even if you buy a property at the excavation stage, by the time the project is finished, the apartment or villa will be ready to move in. Moreover, many developers prohibit making renovations that distort the appearance of the property (for example, painting the facade) and state this in the documents when concluding a deal.

When buying a second-hand home, it is important to evaluate the quality of the property and the surrounding buildings. However, you should keep in mind that often a secondary property in Dubai is actually a new property built a year or two ago and bought by an investor at a lower price for subsequent resale. This is a popular option to invest in the emirate, as housing prices are steadily rising.

Additional costs for paperwork

The expenses for signing a real estate purchase and sale agreement and applying for a mortgage in Dubai will be the same for new and resale properties. Buyers need to pay:

a fee of 4% of the property value in the Dubai Land Department (DLD) + AED 580 ($160);
a registration fee: AED 2,000 ($550) for homes less than AED 500,000 ($136,000) and AED 4,000 ($1,100) for homes over that amount;
realtor's commission in the amount of 2% of the cost of housing.

If the property is purchased with a mortgage, the following should be added to this list:

a real estate appraisal fee – up to AED 5,000 ($1,400);
a life insurance for the borrower (mandatory in the UAE) – 0.3–0.8% of the amount;
a bank fee for arranging a mortgage – from 0 to 1.5% of the amount;
a DLD fee for loan processing – up to 0.25% of the loan amount + AED 290 ($80).

Why Dubai's new real estate is better than resale housing

Among the obvious advantages of primary real estate are the following:

the price is significantly lower than the market price;
a lower down payment (from 5 to 10% of the cost);
most of the payment is not required until the completion of construction;
flexible payment plans (from 2 to 5 years) that may well replace a mortgage;
substantial discounts for off-plan properties;
the developer can pay a 4% DLD fee;
higher returns on investment;
the opportunity to buy housing at the construction stage and sell it upon completion, earning up to 20% of the profit;
as a rule, more prestigious areas are chosen for new projects, which have a large number of amenities.

When it comes to off-plan real estate, there are a number of traditional arguments against buying it. However, when evaluating whether it is profitable to buy an apartment in a new building in Dubai, you should keep in mind that most of them are untenable for the Emirates:

The possibility of delaying or freezing construction. In Dubai, these risks are minimized thanks to strict rules set by the DLD and the Real Estate Regulatory Agency (RERA), as well as the use of escrow accounts, to which developers contribute 20% of the project cost. It is the responsibility of the authorities to ensure that the developer has sufficient funds to complete the project.
You see your future property only in brochures, renders and 3D models, and the result can be disappointing. This is solved by a competent choice of the developer: the leading developers in Dubai have completed dozens of projects that can be evaluated in real time. In addition, many communities under construction are part of a larger area that is being developed by the developer.In fact, off-plan real estate has only one problem: you cannot use it right away – move in and live or rent it out. If this factor is critical for you, it is worth considering alternative options.

Pros of resale in Dubai

The main advantage of resale real estate is the fact that from the moment of payment, you can use it at your discretion. In addition, the following factors can be named:

the price of a resale home may be lower than the cost of a newly completed property;
you make a decision by looking at real property, you can physically assess the quality of development and repair;
you buy a home in an established community with a complete infrastructure;
you can immediately rent out the property and make a profit.

Among the disadvantages are the following:

you buy housing at market value, without discounts and benefits;
less payment flexibility: the entire amount is required to be deposited at once;
the condition of the property may not be as ideal as in a new building.

Conclusion: what kind of housing to choose?

The choice depends on your individual preferences and circumstances. If you are looking for quality apartments or villas in the UAE for living and investment, contact the AX CAPITAL real estate agency in Dubai. Qualified specialists will help you select the property that is right for you and matches your goals. The AX CAPITAL team will guide you through all stages of the transaction and provide high-quality after-sales service. Buying a home in Dubai is easy and safe with us!

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