UAE Property: ‘Should I Buy an Off-Plan or Ready Unit in Dubai?’

Question: I want to buy a property to live in Dubai, but I’m confused about whether to buy an off-plan or a second-hand unit.

I’ve heard that buying off-plan is cheaper and I can benefit from property value increases. However, I would have to pay both rent and payments linked to the construction milestones if I buy an off-plan property.

On the other hand, buying a second-hand unit seems more expensive. I also need to arrange to pay the 20% down payment plus other fees right away.

What should I consider to ensure that a property has good resale value in Dubai? Should I also ask about the service charges before buying a property? Should these charges be paid all at once or every month?

Please advise on other factors I should think about before making a decision.
— MS, Dubai

Answer:

Choosing between buying a second-hand property or an off-plan property is a personal decision. Both options have their good and bad points, so I’ll outline some of them to help you decide what’s best for you.

Second-Hand Market: Pros and Cons

Pros:

• Immediate Possession: You get the property right away, so you can move in or start renting it out immediately.

• Rental Income: If you rent it out, you can start earning money from rent based on the rental contract and payment terms.

• No Handover Delays: The property is ready, so you buy what you see without waiting for construction.

Cons:

• Slower Value Increase: The property value might grow slower compared to off-plan units that are still being built.

• Full Payment Needed: You need to pay the entire cost upfront, either from your own money or through a mortgage.

Watch the video

Off-Plan Market: Pros and Cons

Pros:

1. Lower Initial Costs: You only need to pay the initial 10% to 20% down payment and follow the payment plan.
2. Quick Value Increase: The property value can increase quickly in a rising market, reaching its highest value just before it’s finished.
3. New Property: The property will be new with the latest services and equipment.

Cons:

1. Construction Delays: There might be delays in construction, sometimes up to 12 months, and the developer doesn’t have to pay you for the delay.
2. Uncertainty: There’s uncertainty about the delivery time, the actual size of the unit, the view, and the facilities.
3. High Competition at Handover: If you plan to rent it out when it’s finished, there might be many units available at the same time, which could lower the rent you can charge.

Other Important Factors

Resale Value: The resale value depends on supply and demand. People prefer living near water like marinas or beaches, near major attractions, and with good transport links like a Metro station or good roads. The location will affect how easy it is to sell or rent the property.

Service Charges: Service charges are often overlooked by buyers. These can range from Dh2 to Dh5 per square foot for villas and townhouses, and between Dh15 and Dh20 per square foot for apartments. These charges are a constant cost and may increase over time due to inflation.

Payment Options: Service charges are usually paid annually, but check with the owners’ association if it’s an apartment, or the developer if it’s a villa or townhouse, to see if they need to be paid all at once, every six months, or monthly.

Long-Term Investment

Buying real estate should be a long-term investment because it’s hard to predict the market’s ups and downs. Right now, the market is strong based on good reasons like population growth. However, other factors like government policies, global issues, or changes in people’s feelings about the market can affect property values.