Millennials warm up to buying property in Dubai
They believe long-term investment benefits will outweigh the risks
Millennials in Dubai (aged between 25 to 37 years on average) are slowly stepping on to the property bandwagon, owing to attractive payment schemes and reduced housing prices. Up until a few years ago, the high barriers to entry in the UAE property market made most millennials resort to renting instead of owning a home. Those that are settled and secure in their jobs, maybe with a spouse who will help shoulder the costs, are turning their minds towards buying. However, they still make up only a small number in the total tally of property purchasers.
Lewis Allsopp, CEO of Allsopp & Allsopp, attributes this to two reasons - affordability and mentality.
"On affordability, there are high obstacles to entry into the market, namely the size of the deposit that will be required and the fees involved. A buyer needs at least 32 per cent of the property value. When you take into account a person's current rent, as well as living costs, to save 32 per cent of a property value is an extremely tall order," he explains.
Referring to mentality, Allsopp says young people want to travel the world, nice cars, holidays, material possessions and experience the best of life. "If you drill down to Dubai, you have the added thought process that people don't know how long they will be here. If they don't feel secure in their job, they are not going to buy a property," he reckons.
Being first time home buyers, millennials typically have lower budgets of between Dh1 million and Dh3 million.
"In Dubai, younger people previously hesitated to purchase properties because of the challenge of affordability and larger down payments. Dubai is providing ever more opportunities for this age group and buying a home is increasingly being seen as a great investment among the 27 to 35-year-old expats who had perhaps previously considered the risks to outweigh the long-term investment benefits," observes Rory Brown, senior client manager and Arabian Ranches specialist at Espace Real Estate.
Of the millennials that are buying property, most are doing so for their own use. Although they may buy to lease and get an income, they still have to pay rent somewhere else, which can be unviable.
"Millennials entering the property market typically want to secure a home before they look at investment properties. The reality is that they need a roof over their heads before trying their hand in the investment world," reckons Myles Bush, CEO of PH Real Estate.
"If they are intending to settle in the region for a number of years, set up home here and start to raise a family, it makes sense to put their money into their own asset, paying off their own mortgage rather than someone else's via renting. This age group often have enough money set aside for a good deposit and once you have this, your mortgage payments can quite often be less than what you might be spending on rent," adds Brown.
Buyers in their 20s prefer to invest in apartments while millennials in their 30s are considering villa communities as they start to think about raising a family.
Smaller families with budget limitations are looking at smaller units, perhaps 1-bed or 2-bed apartments. Location is also key for millennials. Therefore, areas with good facilities and good accessibility are key. A good local gym, a super market and easy access to the major highways are always desired.
"Due to their age, they typically prefer a more modern design. Floor-to-ceiling windows, chrome fittings and sharp lines are the current fad. Jumeirah Lakes Towers, Dubai Marina and The Greens are on top of their priority list," informs Bush.
"Additionally, we are seeing buyers choosing locations where their 'millennial companions' are also investing. The developer quality is now taken into consideration. Perhaps potential buyers have seen their friend's fingers being burnt and while they are now seeing the benefits of investing in the property market, they want to protect themselves by investing with the more credible, larger developers," continues Brown.
Owing to their budget constraints, millennial buyers usually opt for affordable properties with special offers on payment plans and fee waivers. Developers are also customising their products by offering more attractive payment plans and flexible deposits to entice new buyers. More incentives such as free service fees for up to three years, interest-free bank payments of up to five years, discounts on Dubai Land Department fees and full payment up to five years after handover, are being offered.
"Millennials will look to off-plan if the terms suit them better. Owing to the high cost of entry, these properties suit the millennial buyer perfectly," says Allsopp.
"Many off-plan projects are promising to complete in short time periods, and if the developers behind the projects are well-known established brands, the new buyers feel confident the developer will deliver and they will get a return on investment," concludes Brown.
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