Here at Holborn Assets we believe that off-plan sales figures offer an interesting insight into the market. They’re often a good indicator of the current state of mind of developers in any given market, and a useful pointer for those of us looking to gauge the way things are heading. With all that in mind, a recent report from the consultants at Reidin-GCP doesn’t make very cheerful reading for potential investors looking at Dubai.

Big falls

According to the team at Reidin-GCP, Dubai’s off-plan sales dropped by 37% in the first quarter of this year, with only 4,564 off-plan sales registered during the period. January had the highest number of sales, with 1,752 units, while March posted the lowest at 1,226 units. To put that in financial terms, the off-plan market lost around Dh5.91 billion compared to the same period last year.

There are several reasons behind this. One is a phenomenon we’ve touched on in the Holborn Assets blog in the past – the increasing number of joint development agreements (JDAs) – which has seen more developers working together to bring their project to market quickly. It’s resulted in a real slump in the number of off-plan launches, as developers (particularly the smaller ones) back away from doing too much on their own in the current economic climate.

A lack of incentive for buyers

So, what does this mean for investors? Well, the slump isn’t unexpected – coming, as it does, on the heels of a booming 2017 in terms of off-plan launches. But, although it’s an expected low-point in a cycle, that doesn’t mean that potential investors should necessarily expect to see the amount of off-plan sales increasing any time soon.

There are several factors at play here. According to Sameer Lakhani, one of the experts at Global Capital Partners, developers aren’t making much use of incentives to help pick the off-plan market up again – he explains that “the lack of an extension of post-handover payment plans and other incentives” is certainly holding things back in terms of buyer demand.

Coupled with the impact of Ramadan and the general dampening effect that the new VAT rules have had on the market (as a whole and the commercial sector in particular) we can’t see off-plan sales picking up substantially in the coming months.

For now, we’d say to investors that it’s a case of sit tight – and wait for the outlook to improve in the second half of the year.