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While most seasoned investors understand the primary and secondary markets, newcomers often find these concepts confusing. So here we are going to discuss them. Because each market presents different opportunities, advantages, and risks, investors must design their strategies accordingly.
Primary Real Estate Market in Dubai
The primary real estate market includes properties that the developer sells directly. In most cases, these are new construction off-plan projects, which denote the property under construction, to newly completed developments. The primary market is dynamic thanks to the regular inflow of new and exciting projects from leading developers such as EMAAR , DAMAC , Nakheel ,etc.
The main features of the primary market are:
Off- Plan properties
Price Advantage: Off-plan properties are usually provided at lower prices than ready ones. Investors can book these early at pre-launch prices, and in many instances, the capital appreciation after the completion of the project is significant.
Payment Flexibility: Most property developers offer attractive payment plans where a buyer can pay in installments throughout the construction period while initially reducing the financial outlay, allowing much-inducing flexibility for managing cash flows.
Customization Opportunities: An off-plan purchase structure allows interior and layout customization toward personal preferences.
High ROI Potential: A substantial measure of investors who enter at an early stage of an off-plan project often realize a high return on investment because property value increases as construction advances.
Reported that in 2023, the price averages of off-plan apartments in critical areas such as Downtown Dubai are between AED 2,000 and AED 2,500 per square foot while upon analyzing emerging areas like Dubai South , properties are offered as low as AED 900 per square foot.
For instance, in 2023, off-plan apartment prices in key areas like Downtown Dubai ranged between AED 2,000 and AED 2,500 per square foot, while in emerging areas like Dubai South, prices were as low as AED 900 per square foot.
Secondary Real Estate Market in Dubai
A secondary real estate market refers to the resale market, where properties have an owner and are to be resold again. The units are primarily located in developed areas, and their occupancy history is bound to accompany them.
Key Features of the Secondary Market:
Existing Sites:
Mature Community: Properties by Birchy that have been bought from early bird developers are on resale in the secondary market but are very much matured and developed communities now with good service of facilities and infrastructure, including Dubai Marina , JBR, and The Springs.
Immediate Rental Income: The purchaser in a secondary market can earn rental income immediately upon buying, as the asset is in a perfectly rentable condition.
The figures lie in averages established in a 2024 study by Asteco. For secondary market properties in Dubai Marina, the rate is around 6%; in JBR, it's a little higher at 6.5%.
Negotiation and Pricing:
Prices are negotiable: In the primary market, where property developers set prices, the scenario differs from the secondary market, where prices are always negotiable. By this, many buyers get to secure property at a considerable bargain.
Historical Data: Access to historical data on property prices, rental yields, and neighborhood trends in the secondary market allows investors to make informed decisions about future performance.
For example, according to the DLD data of Q1 2024, the price per square foot in the secondary market for Dubai Marina apartments tends to average AED 1,600, and around AED 2,200 for those apartments in Downtown Dubai.
Choice of Alternative:
- Variety of Inventory: The secondary market comprises many properties across all prices, from lowly budget apartments to luxurious villas. That diversity in the market will give the buyer more choices in making one according to his ability, interest, and investment goals.
Of the 2024 total real estate market transactions, almost 40% were conducted in the secondary market by the DLD, thereby stating its importance in overall market dynamics.
Condition and Maintenance:
Property Condition: If it is a secondary market, it may require renovation or upgrading based on age and physical condition. Buyers must consider the refurbishing cost as part of the investment.
Old School Designs: Occasionally, secondary market properties retain their designs and technological edges, which are no longer found in newly built properties. New buyers or tenants may see this as a strike against them.
UAE-based renovation experts state that, on average, it ranges from AED 250 to AED 600 per square foot, depending on the extent of the renovations.
Ready-to-Occupy Units
Immediate Possession: Investors can take possession immediately after purchasing a completed property and can either occupy or rent it for immediate rental income.
Warranties and After-Sale Support: Most developers provide warranties covering structural defects and maintenance, ensuring peace of mind for buyers.
Comparative Analysis: Primary Market vs. Secondary Market
Considerations are varied and, therefore, involve choosing between the two types of Dubai real estate markets—primary and secondary—investment goals, risk tolerance, and market conditions.
Return on Investment (ROI):
Primary Market: Investors in the primary markets, especially in off-plan properties, enjoy the advantage of high capital appreciation. For instance, projects in Dubai Creek Harbour under the off-plan property have seen a surge in value up to 15% during construction.
Secondary Market: Rental income makes returns in the secondary market much more tangible. For locations already established, for example, Jumeirah Lakes Towers , which reported average rental yields of 7%, income security investors find them naturally attractive.
Risk and Security:
Primary Market: The primary market risks project delays or cancellations, which Dubai best addresses through stringent regulations and requirements for companies opening an escrow account.
Secondary Market: The secondary market offers more security, as buyers will deal with already completely renovated properties. The property's condition and how much renovation it would require should be seriously considered.
Market Dynamism and Liquidity:
Primary Market: The first market is highly dynamic, and champions launch new projects occasionally. This market is perfect for any investor who is looking for early-bird investments.
Secondary Market: This market has more considerable liquidity, a larger volume of transactions, and shorter sales cycles for investors who want a quicker exit.
Conclusion
There is potential, but the opportunities that Dubai's primary and secondary real estate markets offer are unique in their rights. The primary market is suitable for investors who seek long-term capital appreciation and investment in the latest property design and amenities. On the other hand, the secondary market reveals immediate returns, old-established locations, greater diversity and variety, and hence immediate returns.
Therefore, the choice between the two markets inherently relies on situational factors, the financial objective, market conditions, and an investor's risk appetite. This is only manageable if investors know how different one market is from another.
