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Is the Dubai property market finally at bargain basement?
- March 7, 2009, 10:21 am
The fourth quarter of 2008 was a historic point for Dubai’s property market. According to a Colliers International report, prices fell by 8%, the first time since the emirate opened its market to freehold investors.
It marked the beginning of something completely different for Dubai, with similar reports by HSBC and other bodies soon following. The HSBC survey found that Dubai property prices had fallen 23% in December from September.
Now, well into 2009, brokers are saying the same, citing falling prices as a great investment opportunity.
But what do you have to do to get these bargain prices? You can only browse websites for so long before you have to call the vendor. And doing so puts you in the ring with some of the shrewdest operators around.
To test the waters, contacted a number of random brokers about properties advertised for sale on the internet or in newspaper classifieds. Three of the conversations have been included in this article. Note that none of the agents are from major real estate brokerages in Dubai.
The elusive approach
A Dubai real estate agent was contacted about a two-bedroom in the Palm Jumeirah Shoreline Apartments listed for Dh3.8 million. “Hi, I’m interested in the two- bedroom in the Shoreline Apartments, I see it was listed previously at Dh3.8 million, but I’d like to know where we are now, given the correction.”
“Okay, well I’ve been off the Shoreline listing for a little while so I’ll have to check with my colleague. Is this for cash purchase, or will you be financing it?”
“I can do cash, but I want to get a sense of where pricing really is at the moment?”
“Okay, cash is great, let me speak to my colleague and I’ll phone you back tomorrow. Do you have a budget?”
“It depends on numerous factors.”
“Okay, I’ll be in touch then.”
In this instance, the agent seemed eager to size the buyer up before offering much information. The prospect of a cash purchase seemed to engender a greater willingness to share information.
Delayed reaction
Following this, spoke to another agent about a three-bedroom, 3885 ft² apartment in Emirates Crown, Dubai Marina, listed at Dh1,799/ft².
“Hi, I’m interested in the three- bedroom in Emirates Crown. Can you help me?”
“Yes, absolutely.”
“I saw an old listing at Dh1,799/ft², is that correct?”
“Yes that sounds right.”
“Can you tell me if the price has changed in light of the recent correction?”
“Well, I’d have to phone the owner and see. Is there a price that you had in mind?”
“I’m just trying to stretch my budget so that I can afford a three bedroom for better resale, I don’t know if I can do it. It depends on the pricing.”
“Alright, well I’m sure the price has gone down somewhat, so let me check with the owner and I’ll phone you back.”
Like the previous agent, he tried to get the phone number of the buyer before offering any information about the current asking price. Again, the agent claims not to know the current price, but shows a willingness to negotiate. Later, he phoned back and offered a price of Dh1,100-1200/ft², depending on the view.
Flexibility
Some agents proved helpful, efficient and responsive. Another broker was phoned about an 861ft², one-bedroom apartment in Discovery Gardens, which was listed for Dh1,100,000.
“Hi, do you have a one-bedroom apartment in Discovery Gardens?”
“Yes, we have a few listings, which building were you interested in?”
“I’m not sure, I just saw an older listing at Dh1.1 million and I thought the current price had to be a lot better than that.”
“It has changed a great deal, we have listings at around Dh650,000 now.”
“I see, can they do any better than that?”
“Well, there is a 900ft² unit that’s set a bit further back into the development, which is less desirable for some buyers, but that one is available as low as Dh580,000.”
This time, flexibility was evident from the outset. Naturally, to really know what the difference is, you would need to see the property firsthand lending to your credibility as a buyer.
There are brokers… and brokers
The lesson of the exercise is that to a certain extent it is a buyer’s market but striking the right real estate agent is critical. Martin Ashkuri, sales director, Cirrus Brokerage, agrees that it’s high times for potential homebuyers. “Currently Dubai’s property market is a shoppers’ paradise because of strong rental yields and overstretched investors looking to off-load property,” he says.
“The reduction in loan-to-value offered by banks also means there are a number of very attractive cash deals available. There’s always room to negotiate in a buyer’s market, the extent will depend on the seller and reputation of the brokerage. Prospective homebuyers should always appoint a professional brokerage that thoroughly understands the market and will offer properties to match all requirements, most importantly your budget.”
Vince Easton, sales director of Sherwoods Independent Property Consultants, agrees that now is a good time to buy. “Prices have corrected sharply from their peak, rental yields are strong for buy-to-let investors and aspirational buyers are seeing some very attractive prices in locations such as Palm Jumeirah, Jumeirah Lakes, Arabian Ranches etc.”
Laura Martorano, CEO of Leo Sterling Real Estate, says there are bargains to be had. “There are always ways to invest well in situations of volatility. The old saying of buy low and sell high applies to today’s market prices. There are very good properties for sale today at a fraction of their price just a few months ago. So value is already built in for future growth or resale.”
Negotiating is a given, she says, now or at any time. “Regardless of what the market conditions are, there
is always room to negotiate if you know what you
want. At the moment, there is more room for negotiation, as the number of opportunities and availability have increased.”
Mohammad Al Zarah, vice president of Great Properties, thinks there’s more room to negotiate in the current climate than previously. “In the past couple of years it was near impossible to do so because the demand was so high – if you couldn’t pay then somebody else could. Today you can negotiate the price as well as the payment plan. I think both developers and sellers realise that the market has changed and have to be more flexible as the demand has decreased and people are more cautious with their cash – this is a great advantage to homebuyers and investors.”
Easton feels it depends on the seller’s situation. “Some need to release cash and are willing to sell at under OP (the original price) while others would rather hold then sell too low.” His advice to prospective homebuyers is not to search forever. “Be careful about waiting too long. We are already seeing the first signs of a shortage of quality property in the right location at below market price.
Also, our research suggests when financing returns to the market the bounce back may be quicker than expected. Buyers have to ask themselves, in six months’ time, do they want to look back and kick themselves for not buying at the prices available today?”
How low can it go?
If Easton is right, then buyers shouldn’t wait until the market hits rock bottom. It might be there already.
“If you are getting closer to prices of May 2006 to May 2007, or, so-called original offering prices, then I would say that it is getting close to the bottom,” says Martorano. “We are still comparing current opportunities to the prices in 2008, which is wrong.
“Up until February 2008 we were having healthy growth, and then almost overnight prices jumped so high that in some cases we witnessed up to 400% appreciation! Surely, professionals in the industry expected a downfall after such unexpected and irrational behaviour of the market.”
Easton expects prices to recover later this year.
“Our research suggests that prices will bottom out by the summer of this year, stabilise in the third quarter and show signs of recovery in late 2009 and first quarter of 2010. This recovery can be accelerated, should the banks and financial institutions start lending more favourably against property via vehicles such as mortgages.”
“According to the Dubai Land Department, prices in Dubai will fall at an average of 20% depending on the location – this is a real bargain for prospective homebuyers as well as serious investors,” says Al Zarah, who also predicts that “prices will stabilise by the end of 2009 or early 2010.”
So what to do? Like most real estate professionals, Martorano’s advice to homebuyers is to stick with a proven broker.
“Find a great real estate specialist and your chances of finding or selling the right place at the right price will be improved dramatically.”
Al Zarah, however, advises buyers “to ensure the property they are about to buy is ready or almost ready, and that they fully understand their financing and payment procedures and what additional fees they have to pay.”
“They must also make sure to look at the quality of the property because as the market matures, people may not be shifting around as often and the quality will need to go a long way.”
Source - GulfNews
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