If you’re expecting me to give you a statement kind of “buy property only from a Developer” in this article that’s not going to happen. Instead, I’ll try to guide you to choose the right fit for you. Every market segment has its own benefits.
First, let me explain to you what Primary and Secondary (Resale) market is.
Primary Market – it’s buying a brand new property from first hands – Developer, or company that is in charge of developing, building, constructing, or delivering the building. It’s like buying a brand new Bentley from a Bentley Saloon directly from Bentley or official dealers.
Secondary (Resale) Market – it’s when you buy a property from a person who bought it from a Developer; or from a person who bought it from a person who bought it from a Developer. Kind of, buying used Bentley.
Understanding the example of buying a car makes it clear for us, that there’s no specific and unbeatable reason to buy a car only from Official Saloon. Someone buys a used Bentley, someone buys a brand new one. Sometimes it’s about the money, but not always.
Now, let me take it to another level by clearing practical facts and cases related to these market segments. Hopefully, it will make you understand your preference better if you’re someone thinking who to buy property from.
- Mostly, properties in the Primary Market are under construction. Independently is it near to completion or no. Because it might get delayed even before few months of the handover. Under construction means under construction. You can’t occupy it.
- Some properties in the Primary Market can be completed and ready to be occupied. This is unsold stock when a Developer is selling ready properties, which Developer didn’t sell during the construction. Mainly, these are the units that compromise in layout, size, view, amenities, floor, etc. But, sometimes, the Developer might start selling the properties only when the project is near to completion. Mainly, it’s done by new developers, understanding that they have no reputation built yet and it creates a challenge to sell when the project just launched.
- Properties from a Developer will always be higher in price. In certain cases, Developers can do promotions trying to match the resale market. But it has a negative effect. Imagine, someone bought yesterday a property for AED 1,000,000 from a Developer and he finds out today it is on sale for AED 750,000 by the Developer. He wouldn’t be happy with a Developer for sure. And he might think of asking for a refund of AED 250,000 having a feeling of being fooled.
- Authentic properties for resale in the market are always having lower prices compared to the Developer’s stock. Obviously, there will be super overpriced properties for resale in the market too, but there’s no demand on them and nobody buys them. It doesn’t mean if someone buys a property for AED 3,000,000 in 2017, he can only sell it at a lower price. No! It means if he bought at AED 3,000,000 in 2017 from a Developer, and in 2021 Developer is having the same properties in stock for AED 3,500,000, a reseller will be able to sell it for AED 3,400,000 for example. So the conclusion is, resale will always be more affordable than Primary. Otherwise, people would buy only from Developers, making private owners handicapped to sell their properties whenever needed.
- While buying a property from a Developer you don’t pay an Agency Fee of 2%, Transfer Fee of AED 4,200 or AED 2,100 and SOMETIMES, you do not pay 4% of the Dubai Land Department’s Fee to register the ownership. 4% is always charged by the Government to register your ownership. From time to time, the Developer might do a promotion waiving full or partial Ownership Registration charges of 4%. Waiving means a Developer will pay it from their account. But frequently with a Developer, you’ll pay AED 1,500 – AED 3,500 as an Admin Fee for doing OQOOD Government Registration.
- Buying a property in Primary Market you have an option choosing the unit you want from the available list, while with the Resale Market you buy what someone wants to sell at this point of time.
- In Primary Market, you’re going to be the first person to live in the property, while with a resale it depends on certain cases, such as, was property ever occupied, was it rented, etc.
- Resale properties might not be available for a particular project.
- Resale properties can still be under the construction. For example, someone buys a property in 2020 for AED 1,500,000. The handover of the property is expected to be in 2023. In 2021, the owner might decide to sell it. It’s a common transaction type in Dubai with proper Government registration, documentation, and regulation.
- In resale, you might not get the deal Developer has offered to the first buyer in regards to a payment plan or other facilities. Let’s say, if a property was bought from a Developer with a Payment Plan of 5 years, and the owner decided to sell it in between. A new buyer might have to make a single payment of the whole amount not inheriting the payment plan. Part of it will go to the owner and part to the Developer, considering the calculation of price, outstanding amount, etc. Again, the inheritance of special benefits depends on the Sales and Purchase Agreement of the owner with a Developer.
- It’s always affordable buying a property on a resale in the current market. But it doesn’t mean you should not buy Primary. Sometimes, it makes more sense to buy from a Developer. By the way, the fact is that prices started increasing. Some owners were able to sell their properties higher in price than they bought during the construction.
- Price is very dynamic and unpredictable. The property you don’t buy today might increase in price. Keep that always in mind.
- Certain properties are unavailable on a resale. It’s only the Developer’s stock. Or, another way around.
- Some properties are only worth buying from a Developer, where other similar alternatives in the market can be higher in prices and lacking benefits new property is offering.
Question: Should I buy a property from a Developer or Reseller?
Answer: You must be careful before making an investment. For example, If you like Dubai Marina, you better will go with a Reseller. If you need a certain property, where there are almost no other alternatives, like single row townhouses, or apartments on Crystal Lagoon you better go with a Developer. It solely depends on what you actually want.
By Akhmed Idigov
Akhmed Idigov is the founder of IDIGOV Consulting and IDIGOV Real Estate companies. Akhmed is actively involved in training hundreds of people and being the part of Dubai Real Estate Institute, Business Consultant, Developer and Instructor at Udemy.