UAE Property: 'Should I sell my off-plan Dubai apartment amid uncertainty or wait?'

Question: I bought a two-bedroom apartment in February from Emaar at Expo City, in Terra Gardens. It’s a first-floor unit of around 1,100 sq ft, for which I paid Dh2.237 million ($609,000). So far, I’ve paid 20 per cent towards the property, plus the 4 per cent Dubai Land Department fee.

I’ve been feeling a bit nervous recently given the current geopolitical situation and uncertainty around property prices.

I’m currently considering whether I should continue making payments and get to around 40 per cent to 50 per cent before potentially selling, even if that means taking a loss, or whether I should simply hold the property until completion around 2030 and see how the market develops.

Given the current situation, I’m second-guessing myself a little. What should I do? Ghery, Dubai

Answer: I can understand why you're questioning your decision to invest at the moment. It's obvious that when you buy something and then the world becomes considerably more uncertain six months later, it's very easy to start looking back and wondering whether you should have waited. I wouldn't panic, though.

You spent four to six months researching the purchase, you bought the property, but not with the intention of selling it six months later. So I would remind myself of why I bought it in the first place before allowing today's geopolitical situation to change what was originally a long-term decision.

Your purchase works out at roughly Dh2,030 per sq ft. Looking at Terra Gardens today, the figures don't suggest you've suddenly bought something that's fallen dramatically out of the market. Current two-bedroom pricing numbers are at around the Dh2,100 – Dh2,200 per sq ft level, although individual units obviously vary considerably according to the building, floor, layout and of course the view.

On the secondary market, some sellers are asking anything from Dh2.09 million to Dh2.5 million for similar-sized units, so I wouldn't confuse an anxious market with your property suddenly being worth substantially less.

I wouldn't sell now.

You're only 20 per cent into the payment plan. Selling now because you're nervous potentially means paying selling costs, accepting a discount to attract another buyer and giving away an investment before the main reason for buying Expo City has really had time to develop.

You haven't bought a completed apartment in a mature community where we already know exactly what the area is going to become. You've bought into the future development of Expo City and that part of Dubai. If your investment was based on Expo City developing over the remainder of this decade, judging it in September 2026 is far too early.

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I'd only consider selling if something fundamental has changed and by this I mean either in your own finances or in the investment itself. Otherwise you're simply choosing a different date on which to make the same decision.

What I would be asking myself is much more practical: Can I comfortably continue making the payments without this property putting me under financial pressure?

If the answer is yes, I'd be inclined to continue with the investment.

If reaching 40 per cent, 50 per cent or eventually completion is going to stretch your finances or keep you awake at night, that's different. No investment is worth putting yourself into financial difficulty for and in that situation I'd start planning an orderly exit rather than waiting until I was forced to sell.

I'd also keep an eye on the actual evidence rather than the headlines. Watch what comparable two-bedroom units in Terra Gardens are actually transacting for, not just what sellers are advertising them at. Watch the progress of Expo City, infrastructure, new commercial activity and what Emaar continues to deliver around you.

One other point to consider, you've already paid the 4 per cent DLD fee. If you sell and buy something else because you're nervous, you've crystallised that cost and potentially selling costs as well. The replacement investment therefore has to be sufficiently better to justify getting out of this one.

If this were my investment and I could comfortably afford the remaining payments, I would be inclined to hold and give the original investment time to play out rather than sell because of the uncertainty we're experiencing today.

That doesn't mean I'm telling you Terra Gardens will definitely be worth more in 2030, nobody can honestly promise you that. Dubai will have considerably more residential supply by then and Expo City still has to mature as a residential destination.

But let's look at the facts, you bought from a major developer, at a price per square foot that doesn't look obviously out of line with today's data, in an area where there will be more activity in the years to come. Therefore, I wouldn't necessarily ask myself, “Am I concerned today?” I'd ask, “Has anything happened that fundamentally changes the reason I bought this property in February?” From what you've told me, I'm not sure that it has.

So perhaps the biggest mistake you could make now would be turning a long-term investment decision into a short-term emotional one.

Q: I have lived in the same two-bedroom apartment in Dubai for three years and my tenancy is coming up for renewal.

For the past two renewals, my landlord increased the rent, which I accepted because rents everywhere seemed to be rising. This year he has offered to renew at exactly the same rent, Dh145,000, and initially I thought that was reasonable.

The problem is that I've started looking online and there are now several similar apartments in my building and nearby for around Dh130,000 to Dh135,000. One even appears better upgraded than mine.

My landlord says I should be happy that he isn't increasing my rent, but I feel I'm now paying above the market. Can I insist that he reduces the rent, or do I have to move out if he refuses? JB, Dubai

A: This is a situation we're going to hear more and more about because the conversation between landlords and tenants is definitely changing.

For several years now, tenants facing renewals were mainly concerned about how much their rent might increase by but in most parts of Dubai today, tenants are beginning to ask a different question.

The important distinction is that a softer market doesn't automatically give you a legal right to a rent reduction. Your existing tenancy is a contract between you and your landlord. Just as a landlord cannot simply increase the rent by what they want, a tenant cannot unilaterally decide that the rent should fall because cheaper properties have appeared online. But that doesn't mean you shouldn't try to negotiate either.

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My advice would be to do some proper homework. Firstly, don't rely on just one unusually cheap portal listing. Find a few genuinely comparable apartments in your building or immediate community. Look for those with a similar size, condition, view, floor and furnishing status. There's a big difference between an asking price on a portal and the rent at which a property will actually transact, so recent rental evidence is even better if you can get hold of this information. Once obtained, this is when you should try to have a sensible conversation with the landlord.

Don't underestimate yourself because you are actually bringing something valuable to the negotiation. You've been there for three years, presumably paid on time and looked after the property. If you leave, the landlord potentially faces a vacant period, possibly some agency commission, cleaning or maintenance costs and the very real chance that the next tenant pays less anyway.

Let's say you pay Dh145,000, while a genuinely comparable apartment can now be rented for Dh135,000. Moving might save you Dh10,000 a year, but once you've paid the movers, deposits, connection charges, the agency commission and endured the inconvenience of relocating, the saving becomes much less attractive.

Equally, your landlord needs to do the same calculation. Losing a good tenant and leaving the property empty for just one month costs roughly Dh12,000 at your current rent before any other expenses. Suddenly reducing your rent by Dh5,000 or Dh7,000 to keep you doesn't look unreasonable. That's where I'd try to find the middle ground. I wouldn't necessarily approach the landlord saying, that rents are falling so you must reduce mine but I believe it would be easier for you to get your point across if you showed him the evidence of what is available. Explaining that you'd genuinely prefer to renew, but the difference between your rent and today's market is becoming difficult to justify.

And be prepared for him to say no. At that point, this becomes a financial decision rather than an argument about who's right or wrong. Work out the true cost of moving versus the true saving over the next 12 months.

For quite a few Dubai tenants this year, I suspect renewal negotiations will be less about fighting against an increase and more about deciding whether renewing the contract will still be worth paying a premium for.

The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario@evadxb.com