"Investing in Residential Real Estate in the UAE: Buy New Construction or Resale Property?"

18.02.2024
Investing in Residential Real Estate in the UAE: Buy New Construction or Resale Property?

The UAE residential real estate market is highly attractive to investors worldwide. It's not just a land of promise for those seeking luxury and innovation but also a platform for investments with potentially high returns. Investors face an important decision: to invest in residential real estate in new constructions, offering modern solutions and the advantages of being the first owner, or to prefer resale properties, which can boast established locations and often more accessible prices. This choice is critical as it reflects not only the financial strategy of the investor but also their vision of comfort and quality of life.

Advantages and Disadvantages of New Constructions

New constructions in the UAE embody advanced technology and high-quality construction. Innovative solutions provide residents with the highest level of comfort and security. Smart management systems, energy-efficient technologies, thoughtful layouts – all create an ideal living environment. What other benefits can you expect in a new construction?

  • Prices lower than on the secondary market;
  • Possibility to make a small initial down payment, not exceeding 20% of the total property cost;
  • The bulk of payment only after construction completion;
  • Flexible payment terms over a period of 2 to 5 years, which can be considered an alternative to mortgage financing;
  • The developer covers the fee to the Department of Land and Property Affairs (DLD), which is 4% of the property cost;
  • High investment return potential;
  • The possibility of selling the property acquired at the construction stage after its commissioning at a profit of up to 20%.

An additional significant aspect in favor of purchasing property on the primary market is the fact that new constructions are usually located in prestigious areas of Dubai and offer a higher standard of living.

Potential Difficulties in Purchasing Property at the Construction Stage:

  • There is a risk of construction delays or suspension. However, in the UAE, such risks are minimized due to strict government control over developer activities. A financial capability check of the company to complete construction is conducted before the start of the project.
  • It's impossible to visually assess an apartment or house at the construction stage regarding quality and comfort.
  • You cannot immediately start using the purchased property. You need to wait for the construction to finish and the property to be commissioned before moving in or renting it out.

Pros and Cons of Buying Resale Property

Resale property in the UAE offers investors the opportunity to invest in properties with a proven history and established infrastructure.

Advantages of buying resale property:

  • Instant access. After completing the transaction, you can immediately use the property: move in, rent it out (short-term or long-term).
  • The price may be lower than in new constructions in the same area. The price depends on the year of construction, condition of the apartment, location, and other factors.
  • You can personally inspect the property, assess its quality, layout, comfort level, and repairs.
  • Developed infrastructure: resale property is often located in inhabited areas with developed infrastructure: shops, schools, hospitals, parks, etc.

Disadvantages:

  • The transaction occurs at the current market value, without the possibility of utilizing special offers or discounts available in deals with developers;
  • There is no possibility for flexible payment distribution — you need to pay the full cost of the property;
  • Mortgages may be available, but the terms may be less favorable than for new constructions;
  • Dishonest sellers may hide encumbrances, legal disputes, or other legal issues.

UAE Residential Real Estate Market Trends

Currently, the UAE residential real estate market is showing impressive growth and development trends. Over the last four years, the Dubai new construction sector has demonstrated significant growth. In 2023, the total sales volume reached 455.7 billion dirhams (US$124 billion) in this sector.

Active construction is expected to contribute to overall market growth in 2024 and beyond, with future demand expected to exceed supply.

As for the secondary residential real estate market, it continues to attract attention due to its diversity and accessibility. Buyers are looking for properties in established areas with developed infrastructure, making resale property an attractive option for those who wish to move in immediately or are looking for real estate with rental potential.

The outlook for the UAE residential real estate market remains positive thanks to continuous government efforts to attract foreign investments, improve real estate legislation, and introduce new construction technologies. These factors, along with the growing interest from international buyers and investors, promise sustainable growth and development of the UAE residential real estate market in the coming years.

Factors for Choosing Between New Construction and Resale Property

Choosing between purchasing a new construction and a resale property is an important decision for every investor. It's important to consider several key factors that can significantly influence your decision.

1. Budget and Financial Capabilities

New constructions typically offer the opportunity to purchase at a lower price at the construction stage, as well as installment plans from the developer, making them an attractive choice for investors with limited initial capital. However, additional costs such as property registration and utility connections should be considered.

Resale property offers a fixed price and the possibility of negotiation, but its cost can significantly vary depending on the year of construction, condition, and location. Buying resale property often requires full payment or mortgage financing.

2. Investment Goals

If the investment goal is to rent out, new constructions may offer higher profitability due to modern real estate and developed infrastructure, but this requires waiting for the building's completion. Resale property allows you to start earning income immediately, however, it may be less profitable due to potential repair needs and lower attractiveness to tenants. For own living, new constructions offer modern layouts and finishes, while resale property allows immediate move-in after purchase, though it may require additional investment in repairs.

3. Price Prospects and Long-term Benefits

Investments in new constructions may be more profitable in the long term due to potential price increases as construction progresses. Resale property offers more stable prices and the possibility of negotiation, which can be attractive for those seeking less risky investments.

4. Additional Factors

It's important to consider the waiting period for move-in, potential repair costs, and legal risks, especially when purchasing resale property, which requires thorough document verification.

Before deciding to purchase property in the UAE, we recommend reading our article "Investing in UAE Real Estate: How to Avoid Risks and Earn Profits?", where we detail potential risks when investing in UAE real estate and offer advice on minimizing them.

Which Property to Choose in the UAE: New Construction or Resale?

The choice between primary and secondary property in the UAE depends on individual preferences, financial capabilities, and investment goals. In any case, the key to success is choosing a reliable and experienced partner. Specialists at Major Real Estate will help find the optimal option and make the purchasing process as transparent and safe as possible. Before you personally visit the UAE, our specialists will show you photos so you can see the construction quality, what the interior looks like, and what is nearby your future home.

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