UAE PROPERTY PRICES INCH UP AS DISTRESS SALES SUBSIDE
Published in Business 24x7

Dubai, UAE, August 19, 2009: Owners who sold their properties at a loss in the first half of 2009 may be regretting their decision now as prices inch up, analysts told Emirates Business.

"Today, we are witnessing less transactions at original prices or below that; the market has stabilised a bit in general and [has] shown some positive signs," said Bernard Aoun, Manager, Residential Sales & Leasing, Better Homes, while talking of the Dubai market.

Some sellers who had been waiting on the sidelines in the hope of a price recovery offloaded their assets at a loss in the first half of the year, ceding to prevailing market prices. This trend has subsided now but properties in the country continue to be sold without much premium.

Despite a second quarter slowdown in the decline of residential property prices in the UAE, a significant proportion of such properties were sold below their original price.

"Approximately 30 per cent of the deals we transacted in Dubai since the beginning of this year were below the seller's original buying price," said Michael Michael, Director of Sales at Landmark Properties.

According to Asteco Property Management, July was the worst month when the maximum number of such deals took place.

"In the beginning of the year, we saw a lot of properties transacted at original prices and even below that, especially off-plan properties with a completion date within six to eight months' time," said Aoun.

Paul Sharland, Sales Development Director at Dubai Luxury Homes, confirmed the trend. "A lot of residential properties in Dubai have been sold below their original price. About 50 per cent of the residential properties that we have sold since the beginning of this year have been at their original price or below that," he said.

"Most of the deals we've done were the ones where the seller bought at the original price of the property and was selling for a loss. But there have been a few cases where the seller bought on the resale market at higher than the original price and sold at a loss," said Sharland.

"Villas in Arabian Ranches (Alma) and Jumeirah Village are being sold at original prices," said a consultant at Asteco. "Apartments in Jumeirah Lake Towers (JLT-V3) are being sold at the original price and five per cent below the original price." The trend is more visible in areas that are not yet fully developed or ones that were too highly priced to begin with. Analysts claim properties in even some of the plush localities in Dubai, which were fetching hefty premiums until a year ago, are now under severe pressure.

Property agents across the board agree that Business Bay, once the most sought-after area and therefore a speculator's haven, is one of the worst affected.

"Prices in the Burj area have fallen 20-25 per cent below the original price and in some cases, where units have not been developed, sellers are willing to offload their properties at 50 per cent less than what they bought them for," said Zakir Hussein, property consultant at Spring Rose Real Estate.

Michael of Landmark Properties said: "In some rare instances, sellers are willing to sell their properties at 40 per cent less than their own original purchase price. However, this depends on many factors such as the individual circumstances of the seller, the quality/location of the property, at which stage of development it is, whether there's a payment due to the developer, to name a few."

Dubai Luxury Homes' Sharland said units in Executive Towers in the Business Bay area were going below their original price. "The main areas where properties are being sold below their original price are various developments in Downtown Dubai, Jumeirah Golf Estates, Executive Towers in Business Bay, Tiara Residence and Marina Residence on the Palm. But this has been the case with many different developments all over Dubai," he said.

Properties around Emirates Road are also taking a hit. Houses in Uptown Motor City are being sold at below their original price. Listings by Landmark Properties show that in some cases apartments in Uptown Motor City are being sold for more than 20 per cent less than their original prices. Townhouses in Green Community too are fetching below-original prices. According to the listings of Landmark Properties, apartments in Dubai Mall Hotel are going at their original prices.

The listings of Rocky Real Estate too show properties on sale for less than their original prices in Arabian Ranches (Al Furjan).

Jumeirah Village South is also impacted. The listings of Stallion Properties show that properties that are under development in the area are going for more than 15 per cent less than what they were bought for.

The only properties that seem to be faring relatively better in the current environment are ones that were delivered some years ago. "People are still making profits on properties in Springs and Greens. Even International City is doing better as the original price there was not too high," said Hussein.

However, there is one big change now as compared to the past months. Sellers are willing to hold on to their properties than take big hits. "We have found that sellers are removing their listings from the market with the aim of minimising their losses. Some examples of these areas include Jumeirah Village South and Business Bay where the infrastructure is still at the early stages. However, there are some sellers who are not in such a position and are eager to sell at a reduced price. This may, however, just prolong the 'bottoming out' of prices in such areas and cause a further drop at a later point," said Michael of Landmark Properties.

Abu Dhabi has also seen its fair share of properties being sold at the sellers' original price and in some cases even below that.

According to Hager Hasan, sales consultant at Light House Real Estate in Abu Dhabi, many properties in the city were sold at a loss in the first half of the year.

"Everything was down in the past months, including good projects. Units in Madina Blue and Ocean Terrace were being sold at a loss," she said. "Sellers who'd bought at Dh1,400-Dh1,600 per square foot in the area were selling at Dh1,200/sq ft, the price at which they bought from the developer. So, they were selling at their original price and in some cases even below that."

"The maximum cut sellers were willing to take was about five per cent. We were full of such offers from January until April. However, things have improved now and people are asking for premiums, in some cases as low as one to two per cent," she said.

The listings of Rocky Real Estate show that properties in the capital are still listed at their original price. Apartments in Marina Square, Ocean Terrace and Hydra Corporate are all listed on their original price.

"I believe Marina Square is going to be the first development ready on Reem Island. You can buy there for about Dh1,250 per sq ft. If you bought into an off-plan development last year on Reem Island for Dh2,000-plus per sq ft [and much higher than that in some cases], which isn't going to be ready for another two years, then realistically you haven't got much of a chance of selling without incurring a significant loss," said Sharland.

According to Better Homes office in Abu Dhabi, the situation is improving and buyers are negotiating and are prepared to wait now. The maximum cut that sellers are willing to take depends on when they purchased and when the property will be ready. However, such kind of deals are taking place for the Al Reef Development and Al Reem Island, said Loshini Lawrence, Operations Manager, Better Homes Abu Dhabi.

Talking of the Abu Dhabi market, Andrew Chambers, Managing Director, Asteco Property Management, said: "The majority of sales have been from buyers who bought in 2006 and 2007. As the prices reached close to original prices, these sellers were able to exit at a small premium that included transfer fees. Over the past couple of months, the apartments on Marina Square are selling at a slight premium over original price of the property as they near completion."

As per Chambers, May and June were the months during which the maximum number of such deals happened.

On the cut sellers are willing to take, Chambers said: "That depends on their purchase price, but some of them are willing to go down to the original purchase price. Certainly the sellers who bought apartments at the peak have not been able to sell apartments and some are trying to negotiate a discount on their purchase price. Al Reem, Al Raha Beach, Al Raha Gardens and Golf Gardens are the places where such deals are taking place."