What’s in a Name? Buying Off-plan Branded Residences — by Anna Sheremet

For investors and end users nervous about taking a gamble on an off-plan purchase, a branded residence could offer reassurance — and guarantees a property with style.

What's in a Name? Buying Off-plan Branded Residences — by Anna Shermet

I have been in the off-plan real estate industry in Dubai for over ten years. The demand for off-plan properties (early construction stage) was always there because buyers benefit from capital appreciation and payment terms. However, in the past few years, most buyers have taken a lot longer to commit to an off-plan purchase than they would on the secondary market.

Risks of Buying Off-Plan

I have observed a common concern among buyers looking to purchase an off-plan property. Both investors and homeowners, mainly based on previous experiences that were unpleasant, often question the quality of the finished product upon completion. Unfortunately, when purchasing a property that is in the off-plan stage, consumers will often face some risk of receiving a product that doesn’t comply to the standards they were initially presented with when signing the agreement. This is exactly why buyers take their time researching the right developer to go with.

Overall quality of a development’s finishing and amenities have a direct impact on depreciation of the property’s value and rental yield as well. The property management of the development after the completion also plays a big role.

Let’s use the new trend of the ‘sharing apartment’ concept in Dubai as an example, which you can find even in some of the prestigious areas. Once this concept is accepted within the development, the property value drops due to a higher number of residents using the common areas and facilities and the maintenance team can’t keep up. Landlords are affected by the rental yield decrease, while homeowners have to face property depreciation and a decrease in the standard of their living experience.

For off-plan, the delivered quality standard can be affected by many factors such as: cost cutting, developers trying to increase profit margins, large overheads, incompetent contractors, and so on. These issues cannot be predicted in advance.

However, there is one way where you can never go wrong when buying a property if the quality value is one of your main concerns. This is exactly where the ‘branded residences’ concept steps in and has been taking the market by storm.

Branded Residences

The first branded residential tower was launched in 1927 in New York, and since then the branded residences sector has grown dramatically with over 400 residences in more than sixty countries as of 2018. The concept is already well established by global hotel operators offering a variety of three to five-star developments tailored to a client’s financial requirements.

Recently, we have witnessed new luxury brands like Bulgari, Armani, Versace and Lamborghini lending their names to developments.

The traditional branded concept is a hotel development combined with residences that take advantage of the brand’s quality and luxury services. This gives the owner the comfort of owning a home with the benefits of a luxury five-star hotel. The brand involvement will always increase a development’s value and can be easily used as an assurance policy. Once the buyer sees an advertisement for a Four Seasons, Marriott or Banyan Tree residences, they already know that they are going to get a high-quality product.

Whether it is a hotel development with integrated residences, residential development with hotel management, or remote hotel tie-in, the actual developer of the project is contractually obligated to follow the brand’s quality standards during the construction period and the fit-out stages of the development. The brand itself is heavily involved in monitoring both processes to make sure their guidelines are followed. Upon delivery of the development, the brand is still involved in monitoring the project, placing regulations, holding annual or semi-annual inspections and usually places a permanent director of residences on site.

View Armani Residences Listings in Downtown Dubai

Resort Style Living

Dubai was already well known for the number of five-star hotels saturating 13.5 million sqft. By 2018, Dubai had the highest concentration of branded residences as well. Today’s investors and buyers are both looking for more sophisticated developments in Dubai that will raise their living experience, not only by sheer luxury but by the benefits of resort-style amenities such as spa facilities, concierge and restaurants. Luckily Dubai has a lot to offer from hotel integrated residences with private beaches and Michelin star restaurants at places like The Royal Atlantis Resort, to urban branded residences like Banyan Tree – Hillside, where owners can enjoy 115,000 sqft of private resort-style amenities without leaving the city.

View Bulgari Resort & Residences Listings on Jumeirah Bay Island

A Safe and Stable Investment

A downside of owning a branded residence is the price point. Generally, they are more expensive than apartments that are not branded. With that, the rental yield is conservative, which current Dubai investors are not used to as they still reminisce about the times of unprecedented property returns during the ‘boom’ back in 2006. However, among global investors, the branded residence concept has gained more popularity over the years and is known to be a safe and stable investment.

Considering that the global population of high-net-worth individuals (HNWIs) is forecast to increase by 40% in the next five years, branded residences will hold a strong position in the property market, offering investors hassle-free returns and the ultimate experience for homeowners.

__________

Read More:

Luxurious Residences in Abu Dhabi – by Carla Maria Issa

Luxurious Residences in Dubai – by Carla Maria Issa

UAE Rental Yields H2 2017-2018

The Pros and Cons of Investing in Off-Plan vs. Secondary Markets — by Rabiah Shaikh

__________

Anna Shermet, Head of Sales, Sweid & Sweid

ANNA SHEREMET

Head of Sales

Sweid & Sweid

How many years’ experience do you have in real estate & market specialty?

12 years in off-plan.

Why did you write on branded residences?

For investors and end users nervous about taking a gamble on an off-plan purchase, a branded residence could offer reassurance – and guarantees a property with style.

In just a few words, describe the UAE real estate market in 2019.

UAE real estate marked by 2018, has developed a variety of affordable options suitable for almost all budgets. This factor has dramatically increased the competition within the region between the real estate giants and emerging boutique developers.

This article was originally published in Property Finder Trends, Vol 5.

This Blog is made available for educational purposes only, in addition to providing you with general information and a general understanding of its content, including referenced laws and regulations, and not to provide specific legal advice. The Blog should not be used as a substitute for competent advice from a licensed professional.