Mohanad Alwadiya

Property Buyers Dissatisfied with Realty Brokers

Some 61 per cent of property buyers in the UAE are dissatisfied with the services provided by real estate agents in the market, according to a new study.

The research was conducted across the UAE with a focus on Dubai by real estate broker firm Harbor Real Estate, which talked with 178 property owners over a four-month period in a series of face-to-face interviews.

The research revealed consumers who bought properties in the past two years remained dissatisfied with the performance of real estate agents. “It all boils down to the servicing style of real estate agents, which has not been up to the satisfaction levels of the property buyers in UAE,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

“Currently, it is still a buyer’s market and services from realty agents need to be of high quality,” he said.

Alwadiya said the Real Estate Regulatory Agency (Rera) had been proactive to ensure that real estate agents deliver quality service, but the real estate broker market continues to be immature.

The study said Harbor intended to serve as a barometre on service levels in the local real estate market.

“Participants evaluated property brokers according to knowledge and skills, ethics and behaviour, consultative ability, and empathy. The respondents were asked to rate their individual experiences on a five-point scale ranging from excellent to very poor. Of those interviewed, 61 per cent of respondents rated their brokers as either poor or very poor,” said the report.

Of those interviewed, 73 per cent had purchased their property prior to the recession – set as October 2008 – while the remainder had purchased their property after October 2008 (post-recession). About 23 per cent of those interviewed purchased within the last four months.

About 12 per cent of consumers who made their purchase prior to the recession stated that their experience was excellent or good.

In the post-recession period, that number fell to about 11 per cent, although satisfactory ratings improved from 25 per cent pre-recession to 31 per cent post-recession.

In the post-recession market, 58 per cent of respondents rated their experience as poor or very poor, bringing the two-year average of dissatisfied customers to 61 per cent. The buyers objected to the lack of agents’ knowledge, consultative ability and empathy.

Alwadiya said: “What we have here is an indicator of an industry which is still relatively immature. The level of proficiency in effective consultancy, based on sound knowledge of the market and an understanding of the buyer’s requirements, appears to be the main shortcoming. Buyers today have choice and are more knowledgeable about the market, and they seek advice from professionals that they feel they can trust. Unfortunately, in the majority of cases, consumers are left feeling disappointed.”

Harbor Real Estate is also monitoring its service-level performance against those of its affiliates.

“What we are seeing globally is a race for improvement. Realty has been under huge pressure due to the recession, and those who wish to thrive in the market will only do so by identifying and responding to the needs of clients,” it said.

Dubai Real Estate Recovery? V, W, U, L or √?

Interview with Mohanad Al Wadiya, Managing Director of Harbor Real Estate Brokerage

Mohanad Alwadiya is the Managing Director of Harbor Real Estate Brokerage, a real estate service provider in Dubai. As Managing Director of Harbor Real Estate Brokerage, Alwadiya is responsible for setting business direction and focus, directing all external and internal sales and marketing strategies for Harbor and its clients and producing the Harbor Report.

Alwadiya has over 12 years of strategic marketing and sales experience servicing global corporate clients. Formerly, Alwadiya was the Managing Director of Residencia Property Consultants, the Head of the Projects Marketing and Sales division for the global real estate arm of Dubai Holding and the Communications Director at Leo Burnett, Dubai. Alwadiya shared some of his thoughts on the recovery of the Dubai real estate market.

There are a lot of conflicting stories in the news about the likelihood of a recovery in the Dubai real estate industry. Where are we really?

You are right. There had been a lot of frenzied reporting … some may say speculation … as to the actual state of the Dubai property scene and where it is situated in terms of recovery. This has led to a lot of nervousness and confusion.

Reports vary, with some analysts claiming the industry has “bottomed out” and others stating that no real improvement can be expected for 18 months or more. The variance in opinion is so wide that now some analysts are critiquing and publicly disagreeing with other analysts’ suggestions as to where the industry is now and where it is heading! I believe that the market is in a phase of fragile stabilisation. The long-anticipated recovery cannot be claimed as yet despite indications through the second quarter of 2009 suggesting that the market had bottomed and that early signs of recovery may be evident.

The problem with many analysts’ views is that the breadth of considerations as to what will initiate and drive the recovery is too narrow in scope. Many observers tend to look at the real estate industry in isolation and not consider the effects of the global, regional and domestic economic performance on the Dubai real estate industry. We need to understand that the Dubai economy, and logically the Dubai real estate scene, is strongly linked to world economic events.

The pace and magnitude of Dubai’s economic recovery and its real estate industry will be largely dependent upon the global economic recovery. To gauge the primary driver of a Dubai economic recovery, we must take a global or macro view first. Consider the following schematic, which highlights the dependency of the UAE and Dubai’s economy on world economic health.

Much has changed over the last three months. We have seen the prevailing sentiment move from doom and dread to hope and optimism. This shift in sentiment has been fuelled by what some people see as being the early signs of a global economic recovery.

So, is the world economic situation improving?

Well, in some areas of the global economy, things have been looking a lot better, indicating the imminent start of a recovery.

There was a strong rebound in most financial markets during the second quarter; however, the beginning of July saw investor nervousness halt the growth on the back of poor news emanating in the US regarding unemployment.

Globally, governments have responded quickly and expansively in implementing monetary and fiscal policies to arrest the global economic decline. The positive effects of these actions implemented in the last quarter of 2008 and first quarter of 2009 started to be felt in the second quarter of 2009.

Economists in Japan, China, the US and even Europe had begun to talk about “green shoots”, or early signs that growth in those economies will start sometime early in the new year. The broad consensus is that these major economies will bottom out in the late third to early fourth quarters of 2009, despite investor nervousness being evident in early July.

Many of the actions and restructuring measures taken by companies to improve their cost structures and balance sheets in order to survive the recession have already been undertaken. In addition, the stronger companies in a wide variety of industries are looking towards strategic mergers or acquisitions which will result in entities which can weather the recessionary storm and be well-poised to take advantage of the imminent recovery. This form of industry rationalisation is healthy, as long as monopolies are not created.

In addition, the various business confidence indices which measure business sentiment around the world have also been on the rise, auguring well for the future.

As a result, stock markets around the world have risen significantly in the second quarter of this year. The generally held view is that movements in the stock market pre-empt economic growth by six to nine months, and therein lies one foundation for hope for many observers.

If you look at US markets, the Dow Jones Industrial Average has gained 27% since its March low. In China, the story is similar, with the Shanghai Composite Index showing a 47% gain since March 2 and the London FTSE gaining 19% since March 3.

The local bourse was also performing extremely well during that period. The Dubai Financial Market had risen 40% since its March low; however, the first week of July saw a sharp drop to pull gains back to a disappointing 15%. Overall, despite the volatility, which will be a feature of markets for the ensuing quarter, the overall improvement in all these financial indices indicates an improvement in confidence of those who are looking for investment growth opportunities, suggesting that a bottom to the world economic woes is somewhere in sight.

Meanwhile, the rise in oil prices had definitely stirred the hopes of many in the region. With oil prices on the rise and reaching around $70, governments around the region were looking much better placed to implement infrastructural spending in order to fuel economic growth. Oil slipped to around $66 in early July, however. If this price level is sustained, the budgeted infrastructural spending proposed by the regions’ governments should continue unhindered.

Of course, the downside to excessively high oil prices is that they may hinder global recovery and drive energy costs onto those economies that are heavily reliant on imported oil.

When will we see real recovery, not just the “green shoots” that everybody is talking about?

This is very hard to predict. You would have heard about different types of recoveries, specifically, V, W, U, L and square-root-shaped recoveries.

In his article of June 2, Will Swarts of The Wall Street Journal provided an excellent explanation of the different types of recoveries, using examples from US and Japanese historical economic performance.

So, what type of recovery would be most likely for the world and Dubai economies?

I believe that either a W-shaped or square-root-shaped recovery is the most likely candidate, but I am leaning towards the latter.

If one considers that the current “green shoots” of the recovery are being fuelled by the enormous amounts of stimulus money that governments around the world have pumped into economies, and that the positive effects of the stimulus packages will naturally be exhausted, then there is a strong likelihood that underlying fundamentals of major global economies will not have improved enough to ensure that the growth fuelled by the stimulus packages can be maintained. Put simply, the effect of the stimulus packages, while effective in arresting the slide of world economies and sparking some “green shoots”, is not sustainable. The fundamentals of economies must provide the impetus for future growth.

An example of this would be the effect of US unemployment and its implications for domestic US consumption. With an unemployment rate rising to 9% or 10%, the US economy will be deprived of one of its principal drivers, which is domestic consumption. If the effect of the stimulus packages introduced by the government wears off while domestic consumption is low due to high unemployment, economic growth would stall, causing a square-root-shaped recovery or even decline, resulting in a W-shaped recovery. Of course, this is just one example of an economic fundamental being depressed, but there are many others.

In addition, the world is likely to be a different place even after the recovery begins in earnest. The attitude towards debt financing is likely to be far more conservative by both investors and lenders. This recession has taught many players in the investment and finance space a painful lesson with regards to risk management.

I believe that the square-root-shaped recovery is more likely given the extent of co-operation, sharing and commitment to address the recession on a global scale. Never before have major industrialised nations combined forces, ideas and stood resolute to address what, at one stage, was shaping up to be a depression. In consideration of this unprecedented co-operation, I have confidence that once the economy begins to recover, that same shared resolve will not allow it to deteriorate into a W-shaped recovery.

So, what does the recovery shape mean for the Dubai real estate industry?

Obviously, everybody wants to see a V-shaped recovery. For the real estate industry, that would result in a rapid increase in the demand for all types of property. But it’s not going to happen. The previous real estate boom in Dubai was driven to a large extent by a rapidly expanding population, made up of speculators, genuine long-term investors and owner-occupiers. Overseas investment, some of it speculative, which was fuelled by favourable exchange rates and changes to property ownership rights, fuelled the growth further. This activity was supported by unhealthy levels of credit availability.

The recovery phase will need to be driven by fundamental and solid economic drivers, not speculation. Population growth, driven by an increase in commercial activity, will be the primary determinant of a real estate recovery as Dubai attracts new business entities, investors and owner-occupiers who have a long-term outlook to their participation in Dubai’s economy. The days of growth driven by speculation supported by questionable levels of credit availability will not be repeated. We are witnessing a major and much-needed step in the maturation of Dubai’s real estate industry and economy as a whole.

So, what type of recovery will the Dubai real estate industry see?

Well, once again, it is likely to be a W or a square root type of recovery. A lot depends on the recovery of the economy as a whole, but there are some factors within the industry itself which may inhibit its recovery regardless of the economy.

The issue of oversupply has received a lot of attention, with some commentators suggesting that property vacancy rates, currently estimated to be around 15%, could double in the industry by the end of 2010. While I don’t subscribe to that view, there is no doubt that the number of properties predicted to be released into the market over the next two years is a concern, as there are an estimated 70,000 new units being released in 2009 and 2010. If demand cannot be generated quickly enough as part of an overall stimulus strategy, then a W-shaped recovery becomes more likely.

We need to look at the supply situation in tandem with demand. It’s impossible to comment on one without considering the other.

The effect and magnitude of the oversupply issue on the performance of the market will be determined by a number of factors which will help generate demand for property going forward. These factors are as follows:

1. Population Growth Derived From Commerce

As stated above, Dubai’s population growth rate needs to increase. Estimates of population decline due to the recession have ranged from 8% to 20% spanning the years 2009 and 2010. Needless to say, whichever prediction proves to be the most accurate, the slide in population must be arrested.

The prime driver of population growth going forward will be commercial activity. Dubai needs to ensure that as the world economy starts to recover, it has positioned itself competitively as a place to do business. It is encouraging to see the government implement a number of initiatives to achieve this end. The first set of initiatives involves the freeze or reduction in the cost of fees and charges on business entities in Dubai. This is a positive step in ensuring that Dubai is a cost-competitive place to conduct business when compared to other regional centres.

The second initiative involves the Dubai Chamber of Commerce proposing an end to the current sponsorship system for foreign companies wishing to set up business in Dubai. The vision of having free entry for companies with few or no barriers is a grand one and, if approved by the Executive Council, will provide a major boost towards establishing Dubai as an accessible and cost-competitive place to do business.

2. Lifestyle Values

The cost of living in Dubai has been a concern for some time. With double-digit inflation in the period leading up to the recession along with spiralling rent costs, many expatriates or companies importing talent from overseas found living costs prohibitive.

While real estate sales prices and rents have fallen, much to the chagrin of investors, and inflation is less than half of what it was eight months ago, this phenomenon will be important in attracting renewed interest in the emirate and stimulating a higher level of activity in the real estate market. Already we are seeing people from neighbouring Sharjah and Abu Dhabi taking advantage of the current low prices to move to Dubai.

3. Real Estate Industry Management and Regulation

Dubai has come a long way with regards to regulating the real estate industry. While the efforts to protect rights, lift standards of professionalism and establish a transparent, credible and functional framework are to be applauded, there is still a long way to go before the industry can be said to be in the final stages of maturation. The Real Estate Regulatory Authority has been considering the viability of a number of projects and reports state that at least 27 projects will be cancelled. This form of oversight is a positive sign, as any rationalisation of developments which are currently being planned can only help alleviate any oversupply situation. It is hoped that a full, robust and decisive review will be completed and the necessary actions continue to be taken, as marginal or non-viable projects can only be considered as “toxic assets” to the industry and the overall economy.

In addition, the ongoing pursuit of transparency is paramount. One of the reasons for such diverse opinions regarding the true state of the industry is the dearth of reliable information and data. While some progress has been made, the industry is a long way from having centrally stored, accessible, reliable, upto- date and relevant information on which to base decisions.

4. Liquidity and Exchange Rates

Liquidity is starting to flow back into the market, but it needs to flow faster. With the Eibor at around 2.4% and many banks successfully increasing deposits, lenders are now in the best position in over eight months to start lending again. There has been some easing of LTV ratios by some banks and the longawaited Amlak/Tamweel merger is reportedly just around the corner. The resumption of business by this entity will help alleviate the shortage of credit available to many potential buyers who are in the market now. While many have focused on liquidity in the local market, Dubai can benefit greatly as the credit markets overseas also start to loosen up.

During times of economic hardship, investors typically seek shelter in a select number of commodities or currencies. The US dollar, despite the US economic financial meltdown, is one such currency. During the early part of the recession, this phenomenon drove the value of the US dollar, and therefore the UAE dirham, higher versus other global currencies. This made foreign investment in Dubai more expensive.

As the global economies gradually show signs of improvement, investors will convert their US dollars into other currencies to avail themselves of investment opportunities around the world. The resulting devaluation of the US dollar and, by association, the UAE dirham, increases the value available to investors from investing in the Dubai real estate scene.

5. Confidence

It was not long ago that Dubai was capturing the admiration and awe of the world. Unfortunately, the world view on Dubai has taken a turn for the worse and needs to be rebuilt.

There has been a disproportionate amount of negative press regarding Dubai since the economic crisis began and this will have damaged investor confidence in the emirate. The recent initiative to address the issue of “Brand Dubai” through the development and implementation of a global communications strategy to address incorrect or misleading assertions regarding Dubai is tremendously important. The success of this initiative will play a major role in accelerating the pace of Dubai’s recovery.

However, confidence needs to be developed in other areas as well. The visa issue is one that has placed a lot of pressure on recently retrenched expatriates when trying to find alternative employment or heading home. This will not be forgotten quickly and will certainly be a consideration of those who might consider making Dubai their long-term home.

From an investor point of view, the Department of Naturalization and Residency has implemented a law which will grant a six-month renewable visa to those who invest in freehold property in the UAE. While this is a positive move to instil confidence in potential investors, the six-month period is considered to be too limited in duration to be meaningful to many investors. It is thought that the federal law should match the Dubai law whereby investors were eligible for a three-year residency visa, provided they visited the emirate at least once every six months. This approach would appear to be far more appealing and enticing.

6. Tourism

A large part of Dubai’s success has been driven by an incredibly successful tourism industry. If one considers Dubai to be primarily a trade/commerce, services and tourism hub, the influx of tourists is vital to the overall health of the economy.

The tourism industry has been a beacon of success in the Dubai economy and plays an important role in introducing the emirate to potential investors and entrepreneurs as well as sun seekers.

7. Oil Prices

It will come as no surprise that the price of oil will help determine the health of the Gulf economies. Despite not being reliant on oil as such, Dubai, being part of the UAE federation, has and will continue to benefit from the massive revenues derived from oil. With oil prices expected to fluctuate in the range of $70 to $75 a barrel going forward, the Gulf economies can continue to acquire healthy levels of revenues to enable government investment in infrastructure without generating huge budgets deficits or accumulating debt. Also, at this level, it is not expected that oil would place undue pressure on recovering economies.

However, there is a catch. It would be disastrous if the price of oil should reach the unimaginable levels of 2008. If this were to happen, those economies which are reliant upon imported oil for their energy requirements would find economic recovery difficult to sustain. This could result in a W-shaped recovery for some of the largest economies in the world and likely effect the recovery of the world economy as a whole.

Dubai would suffer as a result of this, as its reliance on the economic activity of other economies would make it vulnerable to any downturns in trade or global commercial activity and, as we have already discussed, the Dubai real estate industry recovery would stall.

So, in summary, you are predicting a square-root-shaped recovery?

Yes. I believe that the world economy is on the road to a square-root-shaped recovery. I also believe that Dubai has the potential to benefit handsomely from that recovery.

The IMF has stated that the Gulf economies are best placed to surface from this recession. This should come as no surprise, as one thing the Gulf economies have done successfully over the last decade is to accumulate huge reserves of wealth which would serve them well during a recession. This has proven to be the case, as evidenced from the continued infrastructure spending by government authorities.

With regards to the Dubai real estate industry, there is lots of work to be done. In all likelihood, its recovery will lag the recovery of the overall economy; however, in consideration of the rampant, unsustainable growth which was being witnessed in 2008, this should come as no surprise.

It’s important to understand that the industry is not terminally ill. The industry is experiencing some serious growth pains, but will recover. I believe we will see a much improved level of activity in the later part of this year as the world economy strengthens, credit becomes more accessible and Dubai relaunches itself as a preferred place to do commerce and trade.

The current pent-up demand will flow into the market once lending starts again. Many people want to take the opportunity to own a family home or take advantage of the investment opportunities in the market today. The demand is there; it just needs some liquidity to enable the conversion of intention into transaction.

However, a word of caution. While I believe now is a good time to buy into Dubai, we cannot expect the monumental premiums of the past. Real estate is for the long-term thinker and, despite being subject to economic cycles, will always generate wealth as long as it’s considered and managed as a long-term investment.

To think any other way would be to ignore the hard lessons of the last 10 months.

Merger saga expected to continue

Lack of clarity leaves investors and shareholders anxious.

For many in the local real estate market,
mergers and acquisitions appear to be a
logical solution to stay afloat during the
global financial crisis. Opinion is divided
as to whether these moves will have a
positive — or negative — impact in the
short- and medium-term. Yet, it seems
clear that without these mergers and
acquisitions, the result would be a freeze
in financing facilities and diminishing
activity in the property sector, which
would have an adverse effect on the
overall economy.

Within the financial services sector,
the merger plays started as early as last
year. It began with Amlak and Tamweel
announcing their plans of coming together
to create an institution that would have
access to federal funds and strengthen the
country’s home finance marketplace.

When it was announced in
November last year, the possibility of
an Amlak-Tamweel joint venture gained
considerable media attention and
ratcheted up expectations.

In terms of property development,
we have seen similar plays within the
last 12 months. Dubai World, the portsto-
property conglomerate, recently
consolidated the management and
property operations of its subsidiaries,
including Leisurecorp, Dubai Maritime
City and the Dubai Multi Commodities
Centre. The property divisions of these
companies will now be run by Nakheel,
also part of the Dubai World portfolio

Rumours swirl around about a
possible alliance between Deyaar
Development and Union Properties,
stoked even higher by recent news about
the latter having liquidity problems and
losing its long-serving chief executive.

But, the most significant merger
possibility was thrown up quite recently,
with Dubai Holdings’ three real estate
arms — Dubai Properties, Tatweer, and
Sama Dubai — initiating the process to
cobble together an all-encompassing
marriage with Emaar.

Way to ward off dissolution

There is a growing consensus among
those involved in fine-tuning the process
that allowing healthy companies to
acquire those at risk of failing could
stabilise the economy and bolster
confidence in both the financial and
property sectors.

For some, merging with a partner that
has a strong balance-sheet is an essential
step in warding off dissolution. Other
spin-offs include leveraging economies
of scale and getting into stronger
negotiating positions with regard to
suppliers and contractors.

In an ideal context, mergers allow
companies to work together to achieve
long-term, strategic benefits by uniting
complementary businesses into a single,
self-sufficient and more successful
operation. When it comes to the
property sector, consolidated companies
have better control of the overall supply
introduced into the marketplace and the
quality of products and services offered.

Inheriting liabilities, debts

On the other hand, there are concerns
these mergers will place a heavy burden
on the stronger companies involved.
These partners are not just taking over
assets, but may end up inheriting large
liabilities and debts. Furthermore, the
mergers, once they are effected, are
likely to generate a lot of uncertainty
among investors and shareholders.
Investors might have to accept further
delays until these mergers are finalised.

Whatever the end result, the number of
mergers involving financial and property
organisations will only increase. For
the new entities formed thereafter, the
ability to provide prompt, transparent
and practical information could be the
benchmark for success or failure from the
public’s point of view.

The writer is the managing director of Harbor Real Estate

UAE housing market chasing ‘affordable assets’

Residential market activity in the UAE in the second quarter improved significantly over the previous period, driven by a flight to affordable assets, said a report.
Harbor Real Estate Brokerage, an integrated real estate service provider in Dubai, has released of the latest edition of The Harbor Report, which covers a range of the hottest real estate topics, including a special feature on the recovery of the real estate market.

Sales transactions in the UAE, especially in the latter part of the second quarter, increased when compared to rental transactions with middle to middle-lower income earners taking advantage of the new levels of affordability.

“This quarter, the Harbor Report will be focusing on the local market recovery,” said Mohanad Alwadiya, managing director of Harbor Real Estate Brokerage.
“We look at factors that are likely to drive the recovery and the influence of the global economic recovery as it impacts the local scene here in Dubai,” he added.
“Harbor’s results for the second quarter were promising. Not only did we see a 55 per cent increase in the number of viewings but we also saw sales transaction double.’’

Since April 2009 when the first Harbor Report was issued, it has already become well known for its ability to accurately portray industry developments. With in-depth analysis, insider views and trends, the report has already received positive feedback from industry professionals.
Although the report is primarily aimed at professionals in the real estate industry, it also provides valuable information for developers and contractors who want to keep abreast with the latest industry developments, said a statement.

“In our first Harbor Report, which was issued in April, the contents and subjects discussed included credit notes, mortgages and the impact of the global recession on Dubai. This quarter however, the report is focusing more on the initial stabilisation and eventual recovery of the real estate market,” added Alwadiya. – TradeArabia News Service

Improved second quarter real estate activity raises confidence of a recovery

Factors effecting Real Estate recovery detailed in latest edition of The Harbor Report Dubai, August 16, 2009: Harbor Real Estate Brokerage, an integrated Real Estate Service Provider in Dubai, has announced the release of the latest edition of The Harbor Report. The quarterly report covers a range of the hottest Real Estate topics, including a special feature on the recovery of the real estate market. In addition it will give an objective assessment of where Dubai’s Real Estate industry is at present and what are the latest trends in the industry that was highly affected by the economic crisis.The findings of the Harbor Report indicate that activity in the second quarter improved significantly over the previous period with the residential market in the UAE being driven by a flight to affordable assets. Sales transactions, especially in the latter part of the second quarter, increased when compared to rental transactions with middle to middle-lower income earners taking advantage of the new levels of affordability.Managing Director, of Harbor Real Estate Brokerage, Mohanad Alwadiya said:’This quarter, the Harbor Report will be focusing on the local market recovery. We look at factors that are likely to drive the recovery and the influence of the global economic recovery as it impacts the local scene here in Dubai. Harbor’s results for the second quarter were promising. Not only did we see a 55% increase in the number of viewings but we also saw sales transaction double.’Since April 2009 when the first Harbor Report was issued, it has already become well known for its ability to accurately portray industry developments. With in-depth analysis, insider views and trends, the report has already received positive feedback from industry professionals. Although the report is primarily aimed at professionals in the real estate industry, it also provides valuable information for developers and contractors who want to keep abreast with the latest industry developments.

“In our first Harbor Report, which was issued in April 09, the contents and subjects discussed included credit notes, mortgages and the impact of the global recession on Dubai. This quarter however, the report is focusing more on the initial stabilization and eventual recovery of the real estate market,” added Alwadiya.
The Harbor Report was created at the beginning of 2009 by Mohanad Alwadiya, MD of Harbor Real Estate Brokerage and Editor in Chief. The Q2 report can be downloaded on the Harbor Real Estate Brokerage website. Visit www.harbordubai.com for more information.

About Harbor Real Estate Brokerage:
Harbor Real Estate Brokerage is a fully integrated real estate service provider based in Dubai and part of an established world class group of real estate companies since 2001. With a strong reputation and a veteran team with over 15 years of experience in the industry, Harbor Real Estate provides Real Estate Research Services, Integrated Sales & Marketing Services, Sales and Lead Conversion Management Services and Real Estate Investment Portfolio Management Services.
Having served over 5,000 satisfied customers, Harbor has an extensive clientele base that consists of public and private entities, major developers, private and institutional investors and owner-occupiers..
Harbor Real Estate brokerage has a dedicated team of realtors and consultants who are renowned for their expertise, high level of professionalism and insight into local and international markets. The company is committed to providing its customers world class service and innovative real estate solutionsIn 2009, Harbor Real Estate Brokerage established a quarterly real estate report “The Harbor Report”. This candid report covers the latest news, developments and trends in the real estate industry with an in-depth analysis of the latest topics and current affairs.

Dubai Home Prices Fall 24pc in Q2: Report

17 August 2009
DUBAI – Dubai residential property prices fell by 24 per cent in the second quarter compared to the first three months of the year.

However, the number of sales and rental transactions has remained steady over the two quarters, signalling a renewed confidence in the emirate’s battered real estate market, property consultancy Jones Lang LaSalle said on Sunday.

Property prices are falling more slowly, and the gap between the prices that owners are asking and buyers are offering has narrowed, LaSalle said in a statement.

A separate report by the Harbor real estate brokerage said that its sales transactions doubled in number in the second quarter compared to the first, underscoring the idea that Dubai’s over-built market might have hit bottom.

“The narrowing gap between asking prices and achieved prices is an indication that the market is beginning to stabilise, albeit at significantly lower levels of pricing than those seen earlier in the year,” said Craig Plumb, Head of Research at Jones Lang LaSalle MENA.

The Dubai property sector collapsed in the aftermath of the global credit crunch. LaSalle expects that 22,400 new residential units will be handed over this year, even though developers have cancelled or put on hold more than $24 billion worth of  residential projects.

The downturn in Dubai’s once-booming construction industry has created a backlog of legal claims totalling almost £3 billion, The Times newspaper of London reported on Sunday. More than 180 claims have been filed this year, mostly by international  contractors. British firms are estimated to be owed at least £400 million on contracts in the UAE, the newspaper said, citing an article in Building magazine, a British trade publication.

According to LaSalle, the volume of sales and rental deals were stable between the first and second quarters of this year. By contrast, transactions decreased in number by 58 per in the second quarter from the same period a year ago.

“The stabilisation of transactional volumes is an important indicator, which reflects improved confidence among investors,” Plumb said.

Meanwhile, the Harbor brokrage confirmed that activity in the second quarter improved significantly over the previous three months, as more properties have become affordable for more people. Harbor noted that sales transactions, especially in the latter part of the second quarter, increased when compared with rental transactions, with middle to middle-lower income earners taking advantage of the new levels of affordability to buy.

“We look at factors that are likely to drive the recovery and the influence of the global economic recovery as it impacts the local scene here in Dubai,” said Mohanad Alwadiya, the Managing Director of Harbor Real Estate Brokerage.

“Harbor’s results for the second quarter were promising. Not only did we see a 55 per cent increase in the number of viewings but we also saw sales transaction double.”

Factors affecting real estate recovery detailed in latest edition of The Harbor Report

The findings of the Harbor Report indicate that activity in the second quarter improved significantly over the previous period with the residential market in the UAE being driven by a flight to affordable assets.
Harbor Real Estate Brokerage, an integrated real estate service provider in Dubai, has announced the release of the latest edition of The Harbor Report.

The quarterly report covers a range of the hottest Real Estate topics, including a special feature on the recovery of the real estate market.

In addition it will give an objective assessment of where Dubai’s Real Estate industry is at present and what are the latest trends in the industry that was highly affected by the economic crisis.

Sales transactions, especially in the latter part of the second quarter, increased when compared to rental transactions with middle to middle-lower income earners taking advantage of the new levels of affordability.

Managing Director, of Harbor Real Estate Brokerage, Mohanad Alwadiya said:
‘This quarter, the Harbor Report will be focusing on the local market recovery. We look at factors that are likely to drive the recovery and the influence of the global economic recovery as it impacts the local scene here in Dubai. Harbor’s results for the second quarter were promising. Not only did we see a 55% increase in the number of viewings but we also saw sales transaction double.’

Although the report is primarily aimed at professionals in the real estate industry, it also provides valuable information for developers and contractors who want to keep abreast with the latest industry developments.

‘In our first Harbor Report, which was issued in April 09, the contents and subjects discussed included credit notes, mortgages and the impact of the global recession on Dubai. This quarter however, the report is focusing more on the initial stabilization and eventual recovery of the real estate market,’ added Alwadiya.

Off-plan property sales are ‘dead’ and prices continue to slide.

While he said there were signs of stablisation of completed properties in areas such as downtown Dubai and the Palm Jumeirah, Alwadiya said investors lacked confidence in the off-plan market, where prices have slid up to 50 percent since the emirate’s property collapse last September.

“In some areas, mainly in off-plan, prices continue to drop. This is natural,” he told Dubai Eye radio in an interview.
“Confidence levels in off-plan projects is very low. Off-plan sales are almost dead,” he added.

On a brighter note, Alwadiya said his company had seen 45 percent more buyer queries in the second quarter, than in the first quarter.

Property consultant Colliers International said house prices in Dubai fell 41 percent and 9 percent in the first and second quarters in 2009.

Dubai-based Harbor Real Estate offers property advisory services to individual and institutional investors.

Brokerage firms in UAE report double-digit losses

Brokerage firms in the UAE have recorded significant declines in revenues in the past 12 months owing to the slowdown in the real estate sector, with losses running into high double-digits, real estate pokerage companies told Emirates Business.

Elysian Real Estate, a Dubai-based pokerage firm, said there was a 60 per cent decline in sales commission earnings as it has recorded a drop in sales volumes by almost 50 per cent.

“We were making 20 to 40 sales deals a month last year. Now we are doing about 10 to 20 in a month,” said Robert Macnair, Sales Director, Elysian Real Estate.
“Our commission earnings last year were about Dh4 million to Dh6m per month. That has dropped to a monthly earnings of Dh2m to Dh2.5m,” he said.
On the leasing front, Elysian Real Estate was concluding an average of 30 deals a month at this time last year. “Now, however, that has dropped to about an average of 15 deals a month,” said Macnair.

Harbor Real Estate said its profits dipped 38 per cent during the period between the first half of 2008 and the first half of 2009. “Our revenues dropped approximately 40 per cent over the past 12 months. Sales volumes have dropped approximately 70 per cent,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

Peter Penhall, CEO, GowealthyGowealthy, also said due to the overall decline in investor activity within the real estate sector, his company has experienced a decline in its trading levels.

“We have seen a drop in trading levels to the tune of 40 to 50 per cent from previous averages. However, this negative trend should be viewed against the backdrop of abnormal increases in trading volumes during 2008. The real correlation would be current trading vis-à-vis 2007 levels of trading.”
Rajesh Kumar Krishna, Managing Director of UAE-based Indiana Real Estate, said his company has recorded a drop of about 70 per cent in revenues in the past 12 months.

“This includes our profits and commission earnings all together. pokerage firms are now trying to sustain themselves in as many ways as possible, since we are not recording much sales.

“We have also had to lay off a number of our estate agents in line with market conditions and our income through commissions has dropped massively by about 80 per cent in the past 12 months,” he said.

Penhall said profits are based on two factors, revenue and costs. “It has been imperative that both these elements be addressed during the first half of this year. In light of the sharp correction in the pokerage sector, there will be a heightened level of ‘interp-okerage co-operation’ reflecting a maturing real estate market. The correction in the pokerage sector will help more stable firms to naturally look towards supporting themselves in an effort not only to survive this change, but to emerge from it in a more matured manner,” he said.

pokerage companies also detailed the various measures taken by them to reduce their losses in the downturn. Many companies have adopted new policies, including developing a considerable leasing and international portfolio.

Alwadiya said one of the policies now pursued by pokerage firms is building a relationship with a network of other selective pokerages to help each other in sales. “This has helped companies to increase their reach and access different markets. The long-term partnerships, although involving profit sharing, are very effective in establishing a steady and sustainable stream of revenue for the pokerage firms,” he said.

Krishna said Indiana Real Estate was trying to sustain itself in the market by raising a leasing portfolio. “We are not going aggressive on sales at this moment, as there is no point at all. Even if pokers want to invest on the sales front, there is no business left,” he said.

Macnair said: “We have had to adapt quickly to the downturn in the real estate sector. At Elysian, we launched a Malaysian project. And we have made a conscious effort to go outside Dubai. Having said that, developing an international portfolio or a leasing portfolio has only allowed us to minimise losses, not completely remove them.

“Real estate firms, which heavily sold off-plan properties, have suffered the most. Those which quickly resorted to developing a leasing portfolio have benefited.”
Harbor Real Estate said its leasing volumes quadrupled in the past 12 months and the research and consultancy assignments doubled. “We have managed to optimise our revenue streams by focusing on specific areas of the market that emerged following the property crisis, including consultancy, research and leasing services and even consolidation transactions,” said Alwadiya.

“In 2009, our leasing division became one of the main revenue generating streams owing to the increased demand for leasing. pokerage companies have also benefited from the fact that developers and sellers started providing handsome compensation packages in return for sales results,” he said.
Penhall said the leasing sector is witnessing an enormous level of competition with very low cash takeouts.

“Further, the leasing sector is compounded with unprofessional behaviour on the part of certain independent service providers. Therefore, we have chosen to retain a lower profile in the leasing market and our exposure to this sector of the real estate market is limited,” he said.

He said like most pokerages in Dubai, GowealthyGowealthy, too, has had to adjust its trading model to suit market conditions. “Unlike most of the general pokerage companies during the past year or two, we chose to focus our business model on providing a dedicated service to a select number of developers, providing them with a full services-sales-marketing functionality,” said Penhall.

“The market correction during the latter part of 2008 has seen a significant directional change away from off-plan properties, with the current focus being on the secondary markets in completed products. Our business model has seen a significant realignment during this correction period.

“Initially our focus was on realigning our revenue model towards the areas of business where there was action. Since Fepuary and March, GowealthyGowealthy has been extremely busy in servicing the ‘open house’ concept. We have achieved a significant number of transactions from this sector, which have helped in minimising trading losses during the first six months of this year.”

According to GowealthyGowealthy, the recent months have reflected a steady increase in the number of overall deals, although current levels are at significant lows in comparison to 2007 averages.

“We are seeing a slow increase in deal values within certain high demand areas, such as the Palm Jumeirah, Downtown Burj Dubai and Dubai Marina. We anticipate a further consolidation phase during the coming two months. The year 2010 looks to be a year of stabilisation and steady yet marginal growth.”
Macnair said residential properties with good quality finishes were the ones faring well at the moment. “Prices in Tiara Residences in the Palm Jumeirah have gone up from Dh1.9m last December to Dh2.3m.”

Alwadiya said affordable living areas such as Discovery Gardens and International City were becoming more popular among the middle-class rental segment.
“Yield generating assets are becoming very popular among the investors segment, such as ready properties within well-developed and maintained communities such as the Palm Jumeirah, Dubai Marina and Downtown Burj Dubai.

“Affordable housing is expected to generate higher yields over the short-term before the lower quality of the establishment begins to be reflected in potential tenant valuations. Hence, luxury properties that offer high-quality finishes, amenities and facilities are looked at as a safer long-term investment option,” said Alwadiya.

Penhall said properties purchased before the late 2007 and 2008 boom phase should now be coming back into a net gain position.
“As the market starts to reflect a glimmer of hope in positive price changes, it is becoming more difficult to source quality properties, so we see this as a particular driver of the short-term marketplace. Finished products, particularly villas, have shown the most activity. It is periods like this that force the most dynamic businesses to adjust to market conditions and it is the businesses that have been able to do so quickly and efficiently that will come out of this challenge stronger and better equipped to handle the up-kick in the market that will inevitably follow this period of crisis,” said Penhall.

Alwadiya said the number of viewings and transactions during the second quarter of 2009 have increased dramatically compared to the first quarter of the year. “For us, viewings increased by 45 to 50 per cent in the last quarter.”

According to Macnair, however, Dubai can expect to see a further reduction in sales and lease prices.

“Only areas such as ‘The Palm’ and Downtown Burj Dubai will remain expensive. Areas such as Victory Heights and Al Farjan are all priced currently below 25 per cent of their original price. When prices reach 25 per cent below the original price, that is when people start buying in these areas,” he said.

Krishna said Dubai’s real estate has been delivered as an investment product. “Investors will only enter the market here once the world economy recovers. It is difficult to predict any revival time for Dubai as we have to wait till international markets show signs of recovery.” By Anjana Kumar © Emirates Business 24/7 2009

Property expert Mohanad Alwadiya tackles your property questions

Q: We’re looking to buy a villa in Dubai in the coming year. How do you rate Jumeirah Village as an area to buy property in? What are the pros and cons?

A: Phase two of Jumeirah Village has just been handed over and this has created a buzz in the market, especially in the rental market for affordable two-bedroom villas. According to Nakheel, they are very confident and looking forward to completing all of the 2,200 villas by the end of this year, which is exciting news for the owners of house there. The pros are the affordable prices, a well-planned villa community, a good mix of planned retail and community facilities and the well designed villas and townhouses.

Although Jumeirah Village is strategically located, access is perceived to be inconvenient and it is in close proximity to high voltage power lines. The section that Nakheel is developing is progressing as planned. However, the Jumeirah Village Circle part, which is developed by private developers, is really behind schedule and is creating a lot of negative word of mouth in the marketplace and hence affecting the overall reputation of the Jumeirah Village development.
I would recommend buying a villa there because of the attractive prices and because the supply of villas is much lower than apartments and hence it offers a safer investment. If you are buying a villa to live in, Jumeirah Village offers an excellent community lifestyle.

Q: My wife and I have been looking at possibly buying a two-bedroom apartment at Burj Views in Downtown Burj Dubai as a buy-to-let property. Do you think this would be a reasonable option?

A: The Burj Dubai area is becoming popular with end-users because of the enjoyable living experience it offers. Having said that, and given the popularity of this area, the selling prices of units there have been inflated by the secondary market and resale activities. This has put a lot of pressure on rental yields. The rental return increase could not keep pace with sale prices as potential tenants would compare prices with other competitive areas in Dubai. High quality property consistently generates higher average yields over the long term. Affordable housing is expected to generate higher yields over the short-term before the lower quality of the establishment begins to be reflected in potential tenant valuations.

Q: There have been reports about rental increases in some areas of Dubai. In which areas do you think renters can still get good value for money?

A: Tenants can still expect to get bargain rental deals across the majority of the freehold zones in Dubai. I would recommend Jumeirah Lakes Towers as it remains very much underrated overall.
This development enjoys a very strategic location and has a fantastic master plan yet its true potential is still to be recognised. JLT has a good balance between office space and residential offerings.
The prices are at least 15% cheaper than Dubai Marina and Jumeirah Lakes Towers has the potential to achieve the same status as Dubai Marina, and in a very short time.
Do you have a property question that needs answering? Email fm@alnisrmedia.com along with your contact details