Property Finder research says developers are progressively reducing the unit size in order to lower prices
Developers in Dubai have been progressively reducing the unit size to make properties more affordable for investors and end-users, according to research by Property Finder.
The UAE-based real estate portal said, however, that the average price per square foot has continued to increase over the years.
Based on a comparison of 28,000 apartment transactions in 2015 and 2019, the average size of an off-plan Dubai studio transacted in 2015 was 480 sq ft and has reduced to 406 sq ft in 2019.
Similarly, the average size of an under-construction 1 bedroom apartment sold in 2015 was 845 sq ft, which has shrunk to 670 sq ft today.
Two bedroom apartments are not immune to this trend either, with transacted off-plan unit size reducing from 1,300 sq ft in 2015 to 980 sq ft this year, the research showed.
"This is a strategy deployed by developers to reduce the overall ticket price and thereby attract new customers," Property Finder noted.
It added that the average price per sq ft for an off-plan studio sold for AED1,409 in 2015 has increased to AED1,630 in 2019. Similarly, a 1 bedroom off-plan unit that transacted for AED1,161 in 2015 is being sold for AED1,363 today.
"While this trend is unlikely to affect yield-seeking investors in the short term, they must remember that smaller properties might not appeal to tenants in an oversupplied market," the research said.
Villas and townhouses have also seen their size shrink. Based on a comparison of 2,275 transactions in 2015 and 2019, the size of transacted ready 2 bedroom villas/townhouses reduced from an average 2,620 sq ft in 2016 to 2,046 sq ft in 2019. The size of transacted ready 3 bedroom villas/townhouses has shrunk from 2,836 sq ft to 2,374 sq ft across the same review period.
Around 41,000 homes are slated to enter the Dubai market in 2019 while 28,000 homes were handed over last year, according to Property Finder.
“It is imperative for investors to know what they are getting into when buying off-plan, especially with smaller units being the current trend. If their exit strategy is to sell once the unit is handed over, they might struggle to find a buyer in the secondary market which has been driven by end-users over the last year who have intrinsically become more savvy and have many options to choose from,” said Lynnette Abad, director of research and data, Property Finder.