Over the last couple of quarters there has been a dichotomy in the rise and fall of sale volumes across the Dubai real estate market.
Since 2017 Q3 till date ready transactions have risen by 24%, while off-plan transactions have fallen by 32% in the same time period. In 2017 off-plan dominated the market landscape accounting for 60-70% of all sales. However, in the first quarter of 2018, we have witnessed a reversal where ready sales account for nearly half of the overall activity. This trend is expected to continue and was widely expected as off plan incentives reached their theoretical maximum and the price gap between ready and off plan prices reached unsustainably high levels and have begun the process of mean reversion.
A quarter-wise dissection of transactional activities reveals that off-plan sales have substantially tapered, while ready sales have increased in the last few quarters. Since 2017 Q3 till date ready transactions have risen by 24%, while off-plan transactions have fallen by 32% in the same time period. We expect that on an absolute basis, ready transactional activity will start to rise, and even though off plan sales are expected to rebound as well, on a relative basis ready transactions will gain by a higher percentage.
As the market has become more value driven, the variable that finally has come to the fore has been one of price. Investors and end users will continue to pursue deals where there is price advantage, regardless of whether it is in the off plan or the ready space. This implies that the luxury end of the market will continue to remain under pressure for the foreseeable future. As developer margins continue to shrink, the market will reach an equilibrium price and product point where the fundamental underlying structure of the market will shape shift from present levels.
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