Buying off-plan in established areas often yields lower returns

More and more people are using ChatGPT to determine where they should buy property in Dubai or Abu Dhabi. The problem is that such AI primarily looks at historical data. As a result, established areas such as Downtown Dubai, DIFC, Dubai Hills or Saadiyat Island in Abu Dhabi are often recommended.

These areas have already established their reputation, which means land prices are high and developers charge a premium for off-plan projects. This makes the investment safer, but also less profitable.

In established neighbourhoods, the value of a property is likely to remain stable, but the entry price is often substantial. This results in a lower return compared to new, up-and-coming areas. Developers know that demand in popular districts is high and adjust their prices accordingly. Less risk generally also means less growth potential.

New areas offer more potential, but also more risk

Those seeking the highest returns should look at new areas that are still in full development. Prices there are often lower and the potential for capital appreciation is greater once the area becomes more attractive. However, it requires more insight and courage to invest at such an early stage. There is naturally less certainty regarding the final quality and amenities.

When purchasing in a new district, it is important to critically assess the developer's reputation, the construction plans, and whether what is stated in the brochure is realistic. The price per square foot can be a good indicator of the potential. In established areas, you sometimes pay significantly more per square foot for the same quality, purely because of the location.

In short, for those seeking certainty, an established area like Dubai Marina or Palm Jumeirah can be a safe choice. But those aiming for a higher return should consider investing in a new area, well before it becomes popular.