Out of the box

The secondary market ... the other side of the competition in Dubai real estate

Ismail Al Hammadi

06 October 2020

Whoever tracks the reports on real estate transactions in Dubai, and monitors the sales curve at the level of the emirate’s map and the quality of sales deals during recent periods, especially the current year, finds that the number of sales deals in the secondary market (real estate resale) is much higher, compared to the number of sales deals directly from the developer. .

The gap is large in view of the high real estate supply in the market directly from the developer, and the high resale deals, which reflects the fact that the real estate sector in Dubai today is witnessing another side of competition, taking place between the developer and the dealer who bought the property from him!

We wonder: What are the reasons behind this result?

How can developers reduce this gap?

The drivers of the secondary market, or rather the resale, are very clear, as "price" is the main reason for this, as the resale prices of real estate have become lower than the developer’s prices directly, which contributed to enhancing the attractiveness of the secondary market to investors at the expense of direct real estate from the developer, Especially with the availability of "cash" for many buyers, especially the end users of the property, which drives them to buy from the secondary market, in order to match the price to their financial portfolios, compared to the developer.

There are several factors that made the secondary market price lower, the most important of which is "liquidation" due to the failure of financing for some buyers, their inability to continue paying payments, and the delay penalties imposed on them, in addition to other drivers that I consider very important in my view: The first is the lack of awareness of some investors. And their lack of understanding of market cycles and fluctuations, in addition to making decisions to sell their real estate due to panic and short-term thinking about investing, based on false information and unfounded analyzes, such as those information related to the continuing decline in prices, which prompted many to liquidate their properties at a lower price than the developer, fearing From the future of the market.

As for the second factor, it is represented by some investors complaining about the value of the high service fees, and their lack of acceptance of the situation, as its value negatively affected their financial budgets, thus driving the resale of their units.

And between financial faltering, lack of awareness, and the value of service fees, the result remains the same, and the whole of the resale market prevails over the developer's market, and in the same region, and developers must search for ways and find appropriate solutions to balance this scale, and avoid the accumulation of their real estate products, as they must understand that the competition process Today, it is no longer only between one developer and another, but rather between a developer and a buyer from it, which is the most difficult competition, and he has to overcome it in the appropriate and available ways, the simplest of which is finding successful solutions for defaulting people in paying installments, in a way that serves the defaulting, the developer and the market together, and the approach of prices in the same region.

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Resale prices of real estate became lower than the developer prices directly, which contributed to enhancing the attractiveness of the secondary market.