Insights from 200,000 Data Analyses: The Rising Value of Off-Plan Properties and Secrets to Choosing a Developer
Information regarding Dubai's real estate market, particularly off-plan (under construction) investments, is abundant, but much of it can be misleading. Many real estate agents claim that property prices significantly increase during the construction period, but what do the actual data tell us?
This article provides a thorough, data-driven analysis of over 200,000 real estate transactions in Dubai since 2020. We will uncover the true rate of property value appreciation during construction and highlight the crucial importance of selecting the right developer for successful investments.
Key Takeaways from This Article
- Average Apartment Value Appreciation: The average value appreciation for apartments during construction is 14.7%, not the 45% often claimed by agents.
- Superiority of Villas and Townhouses: Villas and townhouses show significant value appreciation, averaging around 45% during the construction period.
- Importance of Developer Selection: For apartment investments, choosing the right developer is the most critical factor for achieving performance above the market average.
- Unexpected Correlation with Unit Count: Both apartments and villas show a seemingly counterintuitive trend: projects with a higher number of units tend to have a higher growth rate. This is because financially strong, major developers typically undertake large-scale projects.
The Truth About Property Value Appreciation During Construction
You might hear real estate agents claiming that property values can increase by as much as 45% during construction. However, our analysis reveals a different reality.
Average Apartment Value Appreciation: 14.7%
By individually tracking the value growth of all off-plan properties sold since 2020, we found that the average value appreciation for apartments during construction was 14.7%. This might be far from what many people expect.
The Exception: Villas and Townhouses Averaging 45%
However, one property type has shown exceptional growth in this market: 'Villas' and 'Townhouses'. These properties have recorded an average value appreciation of approximately 45% during construction, showcasing a performance that significantly surpasses apartments.
Developer Selection: The Key to Success
Developer selection is critically important for property value appreciation during construction. We analyzed major developers who completed two or more projects in the past five years. Our findings categorize developers into three main groups.
1. Developers Who Outperformed the Market Average
The following developers demonstrated higher growth rates than the market average.
| Developer | Growth Rate | Number of Projects |
|---|---|---|
| Meraas | 30.5% | 2 |
| Nshama | 26.4% | 6 |
| Imtiaz | 26.2% | 4 |
| Iman | 25.6% | 4 |
| Binghatti | 21.2% | 29 |
| Emaar | 21% | 11 |
| Select Group | 20.7% | 3 |
| Ellington | 20.2% | 7 |
| Meydan | 19% | 17 |
These developers each possess unique strengths, contributing to their high performance.
2. Developers with Below-Average Growth Rates
The following developers showed growth rates below the market average.
| Developer | Growth Rate | Number of Projects |
|---|---|---|
| Reportage | 13.7% | 2 |
| TownX | 13.5% | 4 |
| Samana | 8% | 4 |
| Sobha | 7.8% | 7 |
| Tiger | 7.1% | 4 |
Notably, Sobha is highly regarded for its excellent construction quality and livable communities. However, its property prices tend to be set higher initially, which often limits the potential for short-term value appreciation. While a good option for owner-occupancy or high rental yield, investors seeking short-term capital gains should exercise caution.
3. Developers Whose Property Values Decreased
There were also developers whose property values decreased during the construction period. In specific cases, apartments from a major developer saw a 5% drop in value during construction. The likely reasons include the mass construction of many similar units combined with subpar quality. This led to an oversupply of properties and concerns over quality, hindering value growth.
In conclusion, if you aim for above-market-average performance in apartment investments, developer selection is the most crucial factor.
Area Performance and the Surprising Link to Unit Count
Next, let's look at the performance of different areas in terms of value appreciation during construction.
A Surprising Fact: Do More Units Lead to Higher Growth?
We discovered some very interesting, counterintuitive data: the more units a project has, the higher its property growth rate tends to be.
Typically, one might assume that fewer units lead to higher scarcity and less competition, resulting in a better supply-demand balance and thus higher growth. However, the reality is different.
The reason for this is that financially strong, reputable major developers typically undertake large-scale projects and supply a greater number of units. Properties developed by these companies also tend to be of superior quality, leading to faster value appreciation. Of course, when powerful developers undertake smaller, boutique buildings, they similarly exhibit high performance.
The Allure of Villa and Townhouse Investments
As mentioned at the outset, villas and townhouses recorded an average value appreciation of approximately 45% during construction. Let's delve deeper into the strength of this segment.
High Growth Even with Small to Medium-Sized Developers
Remarkably, over the past five years, even villas and townhouses developed by smaller, less-known developers achieved an average growth of 31% during construction. This figure is higher than the average growth rate for apartments built by top-tier developers, illustrating just how strong the villa and townhouse segment truly is.
Cases of Underperformance and Their Reasons
However, even in villa and townhouse investments, there were cases where values showed little to no growth or even decreased. In these instances, the primary causes were that the property's quality was unsuitable for the target buyer demographic, often due to impractical layouts, cramped rooms, insufficient kitchen space, or questionable construction quality.
Similar to apartments, villas and townhouses also tend to perform better when they are part of larger communities developed by strong developers.
Summary and Utilizing Data
In off-plan property investments in Dubai, value appreciation during construction varies significantly depending on the property type and developer selection. While the average growth for apartments may not be as high as agents claim, villas and townhouses show solid appreciation.
The key to success lies in accurately understanding market data and selecting trustworthy developers. Furthermore, detailed analysis of individual projects and developers' past track records, beyond just area reputation, leads to wise investment decisions.
If you are interested in more detailed data on Dubai real estate investments or tools to analyze your own investment cases, please utilize our insider reports and analytical tools.
Original video: https://www.youtube.com/watch?v=LSMYcAXrExw