Transcription
How do you know if an off-plan property is a good or bad investment? For me, I always like to look at the comparables. My view, and my opinion, of how you should really judge these off-plan properties is to compare these off-plan properties to the current ready market, or what we call the secondary market, because this is, in reality, where the true value of real estate becomes realized. When there is a physical asset there, where someone has seen it with their eyes and is able to really be happy to pay a certain amount of money for it, or a certain amount of rent for it as well. And this is what you always need to be drawing yourself back to, obviously. On top of that as well, I would still also, especially for these new up-and-coming areas, try and take comparables for some of the off-plan properties that maybe have launched before, because this is also setting some sort of benchmark for that given area.
Now, when assessing if an off-plan property is a good investment or a bad investment, it isn't as simple as just comparing the prices to the secondary market. And if the off-plan property is cheaper, it's therefore a good investment. It goes a lot deeper than that. And today, I'm just going to quickly break down five aspects that you need to be taking a look at and constantly asking the questions of in order to understand whether this is going to be a good off-plan property or not.
Now, these five aspects when you're doing your comparisons are: firstly, the age of the property; the quality of the property; the view of the property; the location of the property; and finally, the price of the property when compared to the secondary market, and as well also bringing it back to what other off-plan properties are being sold at for today. I think it's important that I explain what I mean by each of these aspects and expand on them in a little bit more detail.
Now, when I say the age of the property, one of the key things that I always love to explain to especially Western investors is that the age of a property can really dictate property value. Now, we live in a country and a city where you could actually get one property selling for double the amount as the property next door, just because it's going to be 20 years newer than the property next door. It's a concept I always have to explain to Western investors because, in, for example, the UK, every single property has been built to the same standard, and there isn't so much more new development coming there. Whereas in Dubai, it's completely different. And this is where I also find a lot of investors go wrong when they're comparing the off-plan market to the secondary market, where they are seeing off-plan properties selling for a lot more money than the secondary market, but they're comparing properties which are 20 years old, which is not a good comparable. So, when you're trying to make your comparables, try and find the most relevant property in terms of age. So, properties which have maybe recently handed over, or been handed over for a one or two-year period, because this is the best way to give you an idea of if your off-plan property is being priced correctly. And if there's a good enough discount on that as opposed to the new market, it could mean that it's a very good investment to take a look at.
Now, when we're taking a look at the quality of property, this comes down to various factors. One of the factors can be, for example, the developer. If it's a new developer, it can be very difficult to judge whether the quality is good or bad. One point I always like to make is that quality is really, really dictated by the finishings of the property, and really, that's it. People like to get potentially bogged down with the structural integrity of the building. However, we live in a city where the standards of construction are extremely high. So, really, the only differences that you see between property to property is just to do with the finishings. And when you're exploring working with a new developer, it's very important to try and get the material board available and try and see the showrooms and the materials that they're using, because that is, at the end of the day, the quality. But again, this comes back to the comparables. You cannot compare a fantastically furnished and very good quality property to a property in the secondary market which is not so good in terms of the quality that's being delivered. And that also goes for vice versa. A developer not developing to the highest standard or with the best reputation cannot be compared to a developer that has an amazing track record in the market.
The third point to expand on is the view of the property. And this is extremely important because we are very lucky in Dubai to see the individual transactions of the units within any given tower. For example, if I take the Downtown area, we do genuinely see prices of a variance of 30% between units which are facing the Burj Khalifa and units which are not facing the Burj Khalifa. So, when you're looking to buy an off-plan property, you need to obviously understand the view that you're getting, and with that in mind, compare it to the right property in the secondary market.
The fourth aspect is the location of where that property is located in Dubai. Location obviously is so, so important, and it's very self-explanatory. But something to go deeper into in Dubai is that location isn't just to do with proximity; it's to do with community. If I give you an example of Dubai Science Park as opposed to Dubai Hills Estate, these are, as you can see on a map, directly opposite them. So, when you're looking at it from the outside, especially if you're not familiar with Dubai, you would probably assume that if you're buying something in Dubai Science Park and it's going to be a lot cheaper than Dubai Hills, it's going to be a really good investment. However, Dubai Science Park is a completely different community. I talked about this concept in one of my previous videos, but this is what I call a multi-developer community, which has different developers building different projects, whereas Dubai Hills is a master-planned community all by Emaar. So, as a result, the values, although they are next to each other, are always going to be different, and you cannot make a comparison of a Dubai Hills unit to a Dubai Science Park unit as a result.
And then finally, and obviously most importantly, once you get a good understanding of what the most similar comparable is in the market, you can then properly assess the price per square foot compared to the secondary market. Now, this is very important because it shows, and truly shows, what people are willing to pay for property here. However, I do want to make the point that there are certain areas in the market. If I take, for example, Maritime City, where this is a completely up-and-coming market where there isn't really any secondary market transactions going on in the area. So, when you're looking at areas like this, it is important to understand what other people have paid off-plan already. So, already successful transactions, but also take a step back and ask yourself, what is the most similar or comparable waterfront destination which offers this right now?
Now, for the purpose of this video, I want to use a community called Athlon with this mindset in mind to show you how I would use this process to assess if Athlon is a good or bad investment. So, if we take Athlon, I would probably liken Athlon to a ready community already in Dubai called Arabian Ranches 2. Arabian Ranches 2 is one of the most popular villa communities available, developed by Emaar, and is roughly around about 7 years old for the real estate here. Now, if I were to compare Arabian Ranches 2, I'm going to use, for the purpose of this video, a villa which is going to be backing onto the greenery or the park in Arabian Ranches 2, with a villa which you can buy off-plan in Athlon, which is also backing onto greenery and an amenity space.
With Arabian Ranches 2, you can buy a standalone villa for 14.2 million dirhams, backing onto the green space, with a built-up area size of 5,368 square feet, and the plot being 7,200 square feet. And this would be for a standard unit which is not upgraded. Probably for these villas, in order to renovate them to a good standard, it's going to be anywhere between 2 to 3 million dirhams. Now, this property, as a price per square foot basis on the built-up area, is 2,645 dirhams per square foot, and on the plot, 1,972 dirhams per square foot.
If I then take it back to what you can buy in Athlon currently for something backing onto the park, you would spend 13.8 million dirhams. The built-up area would be 6,272 square feet. The plot size would be 9,000 square feet. And this is going to be a brand-new premium villa, part of their premium villa range, which is using better materials, which is basically like an upgraded villa in something like Arabian Ranches 2. Now, you can see the numbers make a little bit more sense here. It's obviously 2,200 dirhams per square foot on the built-up area, and on the plot, it's 1,533 dirhams per square foot. So, a lot stronger.
However, bringing it back to the purpose of this video, when we take a look at these aspects, obviously Athlon, when it's completed, it will be brand new, as opposed to Arabian Ranches 2, which will be close to 10 years old. And age with property does add a lot more value. The newer properties always sell for more. On top of that as well, the quality of the property is going to be better with Athlon. It's going to be a brand-new unit, part of their premium range. Whereas with Arabian Ranches 2, you have to spend 2 to 3 million dirhams to get it to a similar level as the properties in Athlon today. In addition, the view is pretty much identical. Arabian Ranches 2, that villa is backing onto the park. With Athlon, the villas are backing onto the park and open space there too. And in terms of location, they are pretty much in a very similar location in this what I call E311 and E611 sandwich of communities. The communities themselves have an amazing variety of amenities and services, but I would say with Athlon, because it's more centered around, themed around sports, there is more to do. For example, running tracks and jogging parks and cycling tracks all around Athlon, which you don't get as much with Arabian Ranches 2.
So, bringing it back to the point, the price per square foot with Athlon is obviously more attractive for the similar comparable property in Arabian Ranches 2. But if I were to add on the other aspects, it really does help you understand that this is a better investment beyond the numbers.
Are you already working with an agent that you trust? The reason I ask this is because in the UAE, agents are paid on commission and not on a salary. Every single developer is available through every agent. And if you're already working with an agent that you trust and has given their time to you, I would advise for you to carry on working with them, as their time is extremely valuable. However, if you've not found an agent that is able to show you the whole market and give you unbiased advice, please feel free to reach out to me below. I'll be more than happy to help you with the entire UAE market.
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