investors

Sales show improvement in key realty projects

Downtown Dubai has the highest number of listings by most realty agents.

Downtown Dubai, Emirates Living, Dubai Marina and Dubailand top the listing chart for sales and leasing queries, according to agents.

“Downtown Dubai has the highest number of listings by most realty agents in Dubai. The second popular area is Dubai Marina with a large focus on Jumeirah Beach Residence (JBR),” said Mohanad Al Wadiya, Managing Director, Harbor Real Estate.

For Harbor Real Estate, the number of listings in these areas has increased by 20 per cent to 25 per cent in 2010. “Business Bay with a larger focus on the recently launched Executive Towers comes third, according to us,” he added.

Al Wadiya said Downtown Dubai and Dubai Marina have always been ranked high and are one of the most sought-after areas in Dubai.

“The location of both these areas is good, which is the most important decision investors take while investing. Further, the current price points have also made these two districts more attractive as they have became more affordable.

“Another key reason for this increased attention and demand is the fact that both these areas include popular attractions such as The Dubai Mall, The Marina Mall, The JBR walk, The Marina walk, the free beach in JBR and Burj Khalifa.”

Better Homes’ Liz O’Connor, Director – Residential Sales and Leasing, said: “Our top-selling districts between November 2009 and February 2010 have been The Emirates Living District, Marina District, Downtown District and the Dubailand districts.”

“For us, between November 2009 and February 2010, we received the most listings for the Emirates Living District, such as The Greens, Emirates Living, Jumeirah Village, Jumeirah Lake Tower (JLT), followed by Dubai Marina, Dubailand and Downtown Dubai districts,” said O’Connor.

Vineet Kumar, Head of Leasing and Sales – Dubai, Asteco Property Management, said: “Majority of listings we received in the past two months are for recently handed over projects such as the Loft apartments in Downtown Dubai and the Executive Towers in Business Bay.

“Other areas, which have received good level of listings are Dubai Marina and JLT, villas in Emirates Living such as Springs and Palm Jumeirah.

“Also, Sheikh Zayed Road continues to draw interest from tenants looking for quality residential buildings.

“Listings are always linked to the status of handed-over projects. As more projects have been handed over, or are nearing completion, we have seen a growth in the number of listings in these select locations,” he added.

Handover

Real estate agents said the main reason for these areas recording the highest listings has been due to recent handover within these areas and the fact that these communities offer a complete lifestyle with lesser construction happening in these areas.

Al Wadiya said: “The overall market condition in Dubai is stabilising and the appetite of all the stakeholders in the property market is improving as there is a general consensus that the prices have bottomed out and if there is any further decline, it will be very marginal and will not affect areas or developments that are completed.”

O’Connor said: “For residential real estate, location plays a big role in the demand for these areas. People want to live in popular areas that provide them with a good lifestyle and one which are easily accessible.

“Our customers are increasingly looking for The Emirates Living district, followed by Dubai Marina, Dubailand and Downtown districts,” she added.

Kumar said: “Buyers will show interest in master-plans that are developed and offer convenience of living and at rates which are attractive. Further those buyers who receive handover of their property and do not wish to occupy them for self-use will often offer these for sale or leasing.”

Meanwhile, listings for properties (sales and rentals) in JLT and Discovery Gardens has dropped due to buyers looking at other value for money investments in other parts of Dubai.

Al Wadiya said: “During the second half of 2009, we were seeing more listings for JLT and Discovery Gardens. The listings have been reduced in these areas mainly because of the shift of focus to the more popular areas of Dubai such as Downtown Dubai and Dubai Marina.

“Prices are more affordable in these areas, hence buyers especially end-users and investors are shifting to these areas. In addition, Downtown Dubai and Dubai Marina offer a more established community lifestyle with less construction going on in the area,” he added.

He said the number of transactions in these areas could have fallen during 2010. According to Better Homes, no significant drop in listings has been noted in any particular areas.

“There are always shortages of a particular type of properties within a certain area for the right price which leads to a shortage in particular communities. Certain communities in Dubai, particularly those with villas, do not have many units becoming available as they have end users living in them who are there for the long term.

“The villas in Phase I Green Community are an example,” said O’Connor.

“Further, not having listings in a particular area could mean a number of things, such as a shortage of property within these areas for the right price.

“It could also mean that property owners are leasing rather then selling in these places,” she added.

Harbor Real Estate said the company does not remove any particular area from its listings.

“However, we focus more on the areas that have more demand. Having said that, we continue to provide minimum support to off-plan projects as the demand for these projects is still very low,” said Alwadiya.

Kumar said: “We have identified certain locations and focus on those areas alone. However, we have not removed any areas.

“You may find we do not have a presence in certain areas such as Downtown Jebel Ali and Dubai Waterfront. We will revisit these locations once we believe the market will be interested from a price-point which is agreeable to the sellers.”

Real estate agents said delivery of new properties in Dubai is likely to increase the number of distress sales.

O’Connor said: “Delivery of new properties in Dubai are likely to see a number of ‘distress sales’ coming into the market. In fact this is already happening. In all situations the reasons to sell are unique; however, we generally expect to see distress sales coming from areas where projects are not expected to be completed or cancelled.”

She added that in the case of a property with mortgage attached, the extent to which a seller is willing to sell his property would depend on the mortgage finance, as the final selling price must cover the bank’s finance amount. In the case of cash sales, however, there is no limit to which a seller may sell.

Kumar said: “As more inventory gets delivered there will be sellers who will prefer to exit from the purchase but the value will be linked to quality of project, status of the master community etc.

From the buyers perspective, this is a good time to buy a piece of real estate at realistic value with the aim of holding the property for the mid to long-term.”
He added that the term, “distress sales” should never be used, as selling a property is a seller’s personal decision.

“The reasons for selling the property at the value they deem right is the seller’s choice. We might use the term ‘motivated seller’ but not distress. Quite often such sales are at lower than market price and could translate into a financial loss for the seller. However, market conditions may be only one reason for such sales.”

According to Harbor Real Estate, the term ‘distressed sale’ emerged during the early days of the crisis during the last quarter of 2008 and has soon become a common property jargon.

“Few people really know what it means and how to qualify a property as a genuine distress sale,” said Al Wadiya. “The global credit crunch has hit the property industry hard. Developers find themselves in the position of having built projects which now have no buyers or the people who bought off-plan are now trying to pull out and recoup their deposits,” he said.

He said that distressed properties are properties that are in danger of facing foreclosure proceedings or that have already been scheduled for sale as a result of default on the part of the owner.

“A property is said to be distressed when an owner gets behind on mortgage payments or a direct payment to a developer and the lender or appropriate debt collector begins to start the necessary proceedings to sell the home in order to collect the outstanding debt.

Distressed properties can cover any kind of real estate, from commercial spaces to apartments. It’s a great chance to save, often ranging anywhere from 40 per cent to 60 per cent off their actual market value or buying price, but it’s also a great chance for making a good investment, since purchasing for a discount often means creating a huge margin for future profits,” he said. O’Connor said: “It is important to understand that a ‘distress’ sale is really only where the seller is willing to sell for less than he paid for, particularly if the property is off-plan.

“Some sellers are willing to sell for the original price of the property or less, but many sellers – in particular those with ready properties rather than off-plan – are unable to emotionally ‘let go’ for less than they think it should be worth.”

She said that many sellers will describe themselves as ‘distress’ sellers, even though they may expect to receive quite a bit more than they paid for the property.

“However, in the case of investors off-loading their off-plan properties, those that are prepared to incur a loss will generally accept up to 40 per cent less than the original price in order to just get some of their investment back,” she said.

“Owners looking to sell are increasingly twitchy about moving their properties off the market and banks have large numbers of repossessed property stock effectively sitting on their balance sheets when what they really need is liquid cash sitting in the coffers. All of this adds up to something that buyers love more than almost anything else – the opportunity for a bargain,” said O’Connor.

O’Connor said the situation occurs mainly with cash buyers. “This is a worse situation for a finance buyer, because he has to pay the bank and pay the difference directly from his pocket; in many of the finance distress sales, the client will walk away.”

“It is important to say that using the term ‘distress sale’ without the permission of the owner is considered a breach of the agents code of ethics introduced under by-law No 85 of 2006 because agents are supposed to be trusties for the owners and they should not disclose the owner’s financial status under any circumstances,” she said.

The real estate agents said some properties like JLT, Greens, Dubai Marina, Downtown Dubai are providing some good value for money investments for buyers.
“Some of the apartments in JLT are value for money and will prove to be a good investment when the infrastructure of the community is complete and the metro is fully operational. However, investors need to choose carefully. Those towers on Sheikh Zayed Road side of the community are proving to have the most popular locations,” said Al Wadiya.

“Greens is due to shortly handover and many investors are anxious to off-load their property at original price and in some cases for less,” said Al Wadiya.

More buyers get lawyers to read the fine print

Property owners are concerned over growing disputes and investment security.

The number of property dispute cases filed in Q1 2009 increased by 55 per cent compared to Q4 2008. (EB FILE)

Increasing real estate disputes and concerns over security of a property investment are prompting buyers to seek legal advice prior to making a transaction, according to agents.

“Clients have serious concerns over the security of their real estate investments. Further, increase in number of real estate disputes is a result of many prospective buyers seeking legal advice prior to making a transaction,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

“This was not the case in previous years which also contributed greatly to the problems that clients were facing as proper due diligence was not conducted prior to the sale and purchase of property,” he said.

Speaking to Emirates Business in a round table, Shilpa Guruswamy, Head of Legal and Sales Coordination, Asteco Property Management; Charles Neil, CEO, Landmark Advisory & Landmark Properties and Liz O’Connor, Director – Residential Sales & Leasing, Better Homes, said they were ensuring all correct steps were followed within their companies and ensuring all documentations were in place before a transaction is completed.

Do you have a law firm that advises you on the authenticity of your real estate transactions?

Guruswamy: Yes, we have a legal department, which oversees our transaction details and is also responsible for the compliance and risk mitigation process.

Neil: We have law firms to draw up all our documentation which protects the rights of our clients. Our accounts are audited by one of the four big auditors in order to ensure there is a clear distinction between our funds and our clients’ funds.

Real estate agencies, however, should be careful using companies claiming to be trust companies as they are not regulated, and if they have doubts they should use a reputed company of lawyers instead.

O’Connor: Yes, we do have a lawyer on board who manages our legal procedures and contractual obligations on transactions. Through our in-house lawyer as well as our managers, we ensure that all correct steps are followed and documentation is in place before a transaction is completed.

Alwadiya: In 2009, we joined forces with Prestige Legal Consultants, an international law company, to provide counselling and representation to all our clients in all legal matters concerning real estate in Dubai.

This partnership was started to keep in line with our vision to evolve our services from traditional real estate brokerage of merely bringing buyers and sellers together to world-class end-to-end real estate services. The holistic real estate legal services will complement our diverse line of services and govern all the activities and transactions of our clients.

The combined real estate experience of our firms enable us to provide clear candid counsel and guidance to our clients at all times to ensure that their rights are always protected.

Is this a new trend due to the downturn in the real estate sector?

Guruswamy: Real estate transactions, whether sales, lease, or appointment of sub-agents, are all essentially structured through legal contracts. Therefore, all these underlying documents need to be verified to ensure compliance to statutes and contract laws.

It is not a new trend but as the market matures there is greater emphasis on regulation and transparency. Therefore, there is increased need to have people with necessary legal background and expertise to scrutinise or draft documents. It is in no way related to the downturn because we had a legal department in place and operational long before the onset of the downturn.

Neil: We feel there should be laws allowing the setting up of trust accounts, but in our case customers trust us as we have strong finances and strong shareholders.

O’Connor: No, for us this is not as a result of the downturn in the real estate sector. We created this position a number of years ago due to volume of transactions and to oversee our international operations.

Alwadiya: Real estate-related enquiries have increased since the 2008 financial downturn. Many of the clients have serious concerns about the security of their real estate investments.

It was estimated that the number of cases filed in the first quarter of 2009 increased by 55 per cent compared to the fourth quarter of 2008. This drastic increase in the number of real estate disputes is a result of many reasons ranging from investors not fulfilling their obligations, sale and purchase agreements containing provisions that contradict the law about developers not delivering projects on time, and many more.

Prospective buyers are also seeking legal advice prior to making a transaction. This was not the case in previous years and also contributed greatly to the problems that clients were facing as proper due diligence was not conducted prior to the sale and purchase of property.

Most of the current legal enquiries that our legal division receives are usually concerned with the real estate regulations and legislations.

The profound perception of the industry and the daily interface with real estate clientele have resulted in the espousal of a fresh innovative legal counselling scheme. According to a recent study conducted by Harbor research division, majority of people perceive legal counseling as an exhorbitant service which leaves them with no alternative other than staying unaided and frustrated.

For that reason, the legal solution introduced by Harbor & Prestige is viewed as a results-driven method. Customers who seek legal counselling will incur minimal fees and no extra charges will be required in case of not winning the case.

Real Estate Regulatory Agency (Rera) recently proposed a free legal advice service for buyers and sellers, an initiative that we applaud. We believe that this innovative policy will assist in boosting the confidence levels in the real estate industry.

Can you specify which particular transactions are scrutinised by your analysts and lawyers?

Guruswamy: The legal department is involved in overseeing all transactions not limited to primary sales, secondary sales, leases, registration at the Land Department verification of power of attorneys etc. Should a party to the transaction be a corporate body, incorporation documents of companies need also to be verified.

Neil: We do use lawyers for more complicated transactions and are working with one firm to do conveyance transactions.

O’Connor: We have standardised processes and procedures that govern every transaction. Our in-house legal advisor oversees all the legalities of these processes to ensure that all parties, wherever possible are secure.

Alwadiya: The legal services introduction is vital as the real estate market matures through the current economic crisis to become a more structured and regulated market. We obtain legal counselling for all our transactional activities in order to ensure providing our clients with a secured transactional experience. Needless to say, the more complex and high-end the transaction is, the more legal involvement we require.

Do you collect a deposit from a client in order to lock-in your clients?

Guruswamy: We generally do not encourage collection of deposits. However, should there be a delay in completion of transaction, a deposit may be collected by the agent to secure buyer’s interest and lock the seller to a commitment. In this case the agent takes up the role of an escrow agent.

In case of default, deposit maybe forfeited and returned to the aggrieved party. On successful closure of the deal, the deposit is adjusted towards the balance sale price of the transaction.

Neil: We only take deposits as part of a transaction and to secure the rights of the parties involved in a transaction, we don’t take it in to lock in a client. If the deal falls through, then the deposit is returned in the manner agreed upon by the parties at the time of signing the agreement. Sellers can no longer demand deposits and hold on to them.

O’Connor: We have now begun to encourage our customers to hold their deposit with a Rera-approved escrow facility, but in the absence of an escrow we take a deposit from the buyer as security for the seller.

Alwadiya: Accepting deposits from potential buyers or tenants is a common practice in the property market which is usually used as a closing technique or a gesture to test the seriousness of the potential client. More sellers and landlords are starting to ask for deposits as well in order to secure their interest in the transaction, especially when the closing date of the transaction is delayed for justified reasons such as releasing a property mortgage or finalising the transaction contracts or obtaining a date to conduct the transfer at the developer’s office or the Land Department.

We try to avoid retaining any deposits at our end as this is an added liability on us and it can place us in a conflict of interest situation as we usually represent only one part in the transaction. Having said that, we usually recommend that deposits are usually handed by a financial or legal third party entity with neutral position in relation to the parties involved in the transaction.

Do you maintain a separate account to receive agents’ commissions?

Guruswamy: Commission fees are payable to the agent by the parties involved and shall not form a part of the purchase consideration.

Normally, the purchase consideration is exchanged between the buyer and seller and the commission is paid to the agent. Therefore, there is no possibility of both of them being booked into the same account. However, should the agent be involved in collecting the booking deposit, it is booked separately into a designated account, which is distinct from all other operational accounts. Such payments are held on behalf of the buyer and seller and do not form part of the operational funds of the agent.

Neil: No comment.

O’Connor: We have an accounts department and we run a series of profit centres, most of which have commissions as the primary revenue source.

Alwadiya: Our company’s bank account is supervised by an independent certified accounting and auditing firm. Our internal accounting and finance resources follow the processes and guidelines set by this consultant/firm in order to ensure complete compliance with the best financial and accounting standards.

High service charges hit rental yields

Service charges for some properties in Dubai range between 18 per cent and 48 per cent of annual rents, according to a recent report by Investment Boutique (iB). Further, falling rents coupled with high service charges are contributing to lower rental yields for an investor in Dubai.

Real estate analysts also said that developers in Dubai were not necessarily following the service charges set out by the Real Estate Regulatory Agency (Rera). “We don’t see all the developers abiding by the service charges set out by Rera. For example, the rate for luxury-serviced apartments should be around Dh50 per square foot yet some luxury projects in Downtown Dubai are charging Dh63 per square foot,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

Meanwhile, iB in its latest fourth-quarter report – Market Pulse – said developers of some properties in Dubai continue to charge high service fees despite the Rera regulating service charges in the emirate.

“A 1,000 square feet one-bedroom unit in Discovery Gardens at Dh24 per square foot amounted to service charges of around Dh24,000. Current average rents are Dh52,300, which means that service charges constitute an exorbitant 46 per cent of rents. What this does to an investor’s rental yield is but obvious,” said Heather Wipperman Amiji, CEO, Investment Boutique.

According to Alwadiya, high service charges coupled with falling rents can reduce the rental yields for an investor. “High service charges can burn up the capital appreciation and annual rental yields for end-users and investment buyers.”

Elaine Jones, CEO, Asteco Property Management said: “Currently Although we have seen rents stabilise over the past three months, it is also possible that as developments settle and the true level of maintenance and upkeep is determined that service charges will soften. Different owner occupiers also have varying levels of expectation with regards to security, common area cleaning, landscaping etc. and whilst initially the most cost effective route is chosen in the medium to long term a recognition of the added value that a well cared for and maintained property can bring or add to the sale or rent value is significant.”

She said that property in New Dubai is subject to master community charges in addition to local community service charges and property maintenance.

The impact of service charges has been felt throughout Dubai with developers facing concerns from property owners on the high service charges and perceived low quality of service.

In the case of apartments, service charges constituted between 15 per cent and 32 per cent of rents in the first quarter of 2008. Downtown Dubai and The Green Community charge the highest service fees in the apartment and villa category respectively, with Jumeirah Lake Tower (JLT), Arabian Ranches and Emirates Living being the cheapest.

According to the report, service charges also vary substantially from community to community with JLT currently the most attractive to investors as service charges are between 21 and 23 per cent of rents. Developments such as Dubai Marina, Palm Jumeirah and Burj Khalifa have relatively higher service charges.

With charges remaining more or less stable and rents declining substantially, service charges now constitute between 18 per cent and 48 per cent of annual rents.

Discovery Gardens, a mid-end development with modest facilities called into question the rationale behind high service charges. Owners organised themselves in an effort to force the master developer to reduce the charge. However, they met with limited success as the final rate was reduced by Dh5 per square foot.

Previously in 2008, there were increases across the board with Emaar’s Arabian Ranches doubling, Union Properties’ Green Community also witnessing a 50 per cent rise. The reasons cited included initially subsidised charges, rising labour costs, increasing costs of utilities, such as electricity and water, and inflationary pressures on raw materials.

In December 2008, Salwan, a subsidiary of Dubai Properties and the property management company for Jumeirah Beach Residence, upped service charges at the beachfront community by 129 per cent from Dh9.5 per square foot to Dh21.75 per square foot. In February 2009, Salwan reduced the service charges to Dh15.32 per square foot. Soon after this, owners of units in Nakheel’s Discovery Gardens also realised that their own service charges were well above market rates at Dh29 per square foot, almost double of Jumeirah Beach Residence, with fewer facilities.

Lack of clarity

According Investment Boutique, there continues to be a lack of clarity and solutions with respect to service charges in Dubai. The Strata Law has yet to be ratified, owners’ associations are slow to set up, developers and property management companies continue to charge unjustified rates even with Rera trying to control the increases. Owners and tenants continue to be dissatisfied with the level of service received.

The iB report said some MEP (mechanical, electrical and plumbing) and facilities management professionals speculate without reference to any specific project that the high service fees quoted may be the actual cost of the service provided, but they are unnecessarily high due to poor selection of equipment and materials at project inception as well as a poor maintenance programme.

FM consultants

Including facilities management (FM) consultants at the design stage helps save substantial costs over the life of a building. As the market begins to open to investors, more are interested in the rental yield than capital appreciation. These buyers should also invest in FM advisory services to ensure that running costs to date have not been kept artificially low.

Analysts outlined the various reasons for service charges for villas to be higher than those of the apartments. According to Harbor, service charges for villas are low mainly due to the fact that service charges for villas are calculated based on the plot area of the villa. “In addition, villa communities have less MEP and other common elements in villas compared to apartments,” said Alwadiya.

Jones said: “District cooling, housing tax and Dubai Electricity & Water Authority (Dewa) costs are usually borne by the occupier. Traditional Dubai property that we have managed as full block management will have cost between 20 per cent to 30 per cent of rent income, dependent on air-conditioning, age of building etc. New Dubai property is a little higher due the additional Master Community Charge.”

“Rera reviews and approves the service charge assessed by the home owners association. Rera is also involved in the apportionment of area charges where there is a mixed-use development. The costs that make up the service charges are transparent and the home owners association will usually collect three quotes for each service line so as to ensure that the most competitive rate is secured – bearing in mind always that cheapest is not always best.”

Utility costs will be estimated in the first year based on advice from consultants. The second year’s service charge may well be more accurate than the first as the level of service required and the actual consumable costs are defined. “Service charges are for the common areas of which villas have far less of. Most villa plot and property maintenance costs are individual costs and not shared. The roads, street lighting, landscaping, garbage collection are the only shared amounts,” said Jones.

In case of villas, the service charges are charged on the basis of the plot size. The case of villa service charges differ completely from the fees, accounting for between three and nine per cent of rents, except for The Green Community, which is relatively more expensive. The huge difference in the service charges between apartments and villas is due to a typical building budget.

Villa service charges are substantially lower when compared to apartments as there are fewer common areas to maintain. Security, landscaping and the upkeep of pools and lakes are covered by the service charges, but municipality fees are paid separately and maintenance of the individual villa is the owner’s responsibility.

Chilled water for common areas accounts for a third of maintenance costs, other utilities account for one-sixth and the master community charge accounts for one-tenth for the average property.

A typical breakdown of other costs includes soft services such as pest control, façade cleaning and swimming pool cleaning and treatment, while subcontractor services and repairs cover the emergency lighting system, aviation warning lights, water tank cleaning, automated doors, building management unit (cradle) and its certification, building management system (BMS), fire alarm system, fire protection system, generator, CCTV, access control system, apartment intercom, public address system, lighting control system and gym equipment.

Majority of expenses are specific to apartment blocks and not to villas, which explains the difference. Variations in service charges needs to be taken into consideration by investors choosing between apartments and villas as this could impact both rental yields and capital appreciation. The report also called for more clarity from the developers and property management companies with respect to the manner in which funds are used. It is hoped that once the Strata Law is introduced, owners’ associations will have a say in the matter and the resulting transparency will only benefit the Dubai property sector.

The last quarter of 2009 was when the optimists had predicted that recovery would happen.

“According to our analysis of the market, we still have some time to go before we see recovery in the UAE property sector, especially in Dubai,” said Amiji.

Transactional activity

The majority of transactional activity in 2009 occurred in the completed property sector. The off-plan market has seen very little transactional activity at all during this time period and as such has not effectively been re-priced.

If off-plan projects are completed and enter the market en masse there will need to be an asset re-pricing in terms of rental values and capital values, which will also have an impact on the local market. However, by the end of 2010, we expect some stabilisation as there will likely be more certainty in global markets and local exposure to bad loans. Over the course of the year, project stakeholders are likely to take stock of their situation and either cancel projects with little economic value in the new market of 2010 and absorb the write-offs or allow the supply to come on stream and let the market adjust accordingly.

Residential affordability is key

While rents and sale prices have suffered considerably in Dubai, declining by more than 50 per cent, Abu Dhabi has proven more resilient with rents estimated to have fallen by 23 per cent between the first and last quarters of 2009. Even though Abu Dhabi faces an undersupply, rents have fallen due to factors such as redundancies and job insecurity, the substitution effect of Dubai’s more affordable housing market, and limited selection of high quality or easily accessible units due to the abundance of construction and infrastructure activity.

While sale prices have also been moving downward, properties close to completion on Al Raha Beach and on Al Reem Island have managed to trade at premiums to opening prices although these have fallen between 30 per cent and 46 per cent respectively from their 2008 peaks.

Downward pressure on rents

The greatest contributing factor to the downward pressure on rents in the Abu Dhabi market has been the mismatch between Abu Dhabi income levels and rental values.

There is a lack of affordable property for the majority of people in the emirate. Prices and rents will continue to fall until they reach the level at which the average middle income or upper income end-user can comfortably rent property, assuming an international benchmark of 25 per cent of income on housing expense, or comfortably purchase property assuming a benchmark of 30-40 per cent of income spent on mortgage payments.

As such, excluding the last two categories, which account for 29 per cent of Abu Dhabi’s population, rents in Abu Dhabi are not affordable to the majority 71 per cent of the population, and thus there is a downward pressure on rents in Abu Dhabi given Dubai’s substitution effect.

According to the analysis, affordable unit prices average around the Dh1,000 mark. While prices were reduced substantially in 2009, a further decline is required to bring prices in line with income levels, especially given the fact that average prices in the neighbouring Dubai are currently lower than the Dh1,000 mark.

Developers will need to keep this in mind while pricing new productsbest non gamstop casinos uk

https://ecampania.it/blog/benvenuti_al_sito_del_turismo_e_dei_viaggi_.html

Oil field should boost sector

The discovery of a new offshore oil field is likely to boost Dubai’s economy, although its impact is hard to gauge until its volume is determined, say real estate executives.

With production to begin in 2011, they think the resulting hike in revenue could boost infrastructure development.

“It is hard to tell what impact this will have until we get more information on this,” says Charles Neil, CFO of Landmark Properties. “Then we can judge the impact it will have on finances and infrastructure. More money flowing into the economy will be a positive development. There would be an increase in people to work in production and housing, and revenue flowing in for infrastructure but without barrels per day it’s hard to say.”

Mohanad Alwadiya, managing director of Harbor Real Estate, says the discovery should boost investor confidence, but adds this largely depends on the oil field’s output.”This positive effect will surely rub off on the property market,” he adds.

“Irrespective of the capacity, it can only add to Dubai’s income stream,” says Aditya Awtani of Fine and Country. “The mantra ‘buy on the rumour and sell on the news’ has worked well for many equity traders. However, in the real estate market, especially one that has dropped significantly, investors naturally shall remain on the sidelines until there’s concrete data.”

As the oil field’s production picks up, it will have a positive effect on the property market as well, says Aditya.

“Experts are predicting approximately 10,000 barrels could potentially be pumped via the Al Jalila oil field. If this is to be believed, that would imply, at today’s oil prices, an additional $270 million for Dubai.” This would help reduce the emirate’s budget deficit, he adds.

Abu Dhabi villa prices expected to slide further

Sale prices and rentals of villas in Abu Dhabi are likely to drop as fresh supplies are entering the market and a number of people are shifting to live on the outskirts of Dubai due to its “affordable rates”, said real estate officials.

Already villa prices have dropped in various projects. “We expect this trend to continue during 2010 as more units are expected to be handed over and the number of people relocating from Abu Dhabi to ‘more affordable’ Dubai continue in the short- and medium-terms,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

Currently, in Al Reef Villas a two-bedroom villa goes for Dh1.1 million, a three-bedroom villa for Dh1.6m, a four-bedroom villa for Dh1.7m and a five-bedroom unit for Dh2.3m.

“Villa prices in Abu Dhabi are starting to soften as more units start to flow into the market. This trend has affected the attitude of landlords and sellers and has forced them to be more flexible when it comes to price points and payment terms,” said Alwadiya.

Harbor Real Estate’s first Cedre Villas open house generated great demand

Demand for Villas and Townhouses is still very strong despite the current economic situation

Harbor Real Estate’s first Cedre Villas open house generated great demand

Harbor Real Estate, an integrated Real Estate Service Provider in Dubai, promoted several fully decorated units in the exclusive Cedre Villas in Dubai Silicon Oasis last Saturday. The open house day paraded Twin villas and Townhouses for sale and rent, and welcomed a large number of clients on the premises.

Clients who visited the project were excited about the quality of the finishing, layouts and architecture, the vast spaces, the overall serenity of the community and vigorously the attractive prices.

Mohanad Alwadiya, Managing Director of Harbor Real Estate, said: “Seeing is believing, presenting an open house is a great promotional methodology to attract potential clients, especially that the advantage is for the buyer nowadays. What we are witnessing here is a sign that economy have stabilized and individuals are confident to invest in well established properties that offer them real value for money”

“The project attracted buyers due to its potential when it comes to offering stable capital gains and above average annual rental yields. The attendees of the open house event included a diverse mix of nationalities. Due to the great results and high demand, we have decided to run another open house event on the 30th of January, where we will continue to offer our special added value package to the Harbor Real Estate clients” Added Alwadiya

Open house buyers will enjoy free maintenance for the first year in addition to 90% pre-approved financing up to 25 years and the option of 1 year in-house payment plan which will be offered to owner-occupiers.

The Cedre Villas project provides its residents uncompromised quality and 40% more space than any other villa in Dubai of the same type. The units entertain all tastes with 3 and 4 bedrooms contributing to multi-vibrant lifestyle amenities and smart homes facilities that answer everyone’s wishes.

Harbor Real Estate services have evolved from traditional real estate brokerage of merely bringing buyers and sellers together to innovative world class end-to-end real estate services. The company services include, Real Estate Tailored Research Services, Integrated Marketing Services, Sales, Leasing & Conversion Management Services, Real Estate Investment Portfolio Management Services and, Holistic Real Estate Legal Services.

For more information about Harbor and the special added value offers on Cedre Villas, please contact Harbor on: info@harbordubai.com

Harbor Real Estate’s first Cedre Villas open house generated great demand

Demand for Villas and Townhouses is still very strong despite the current economic situation

Harbor Real Estate’s first Cedre Villas open house generated great demand

Clients who visited the project were excited about the quality of the finishing, layouts and architecture, the vast spaces, the overall serenity of the community and vigorously the attractive prices.

For More information about Harbor and the special added value offers on Cedre Villas please contact Harbor on info@harbordubai.com

Ask the Experts

Every month we invite you to have your property questions answered by an expert. This month, Mohanad Alwadiya tackles the task.

Q I’ve been looking at a few Union Properties developments, but am unsure about buying leasehold. How does this differ to freehold property in Dubai?

A The choice between freehold and leasehold property depends mainly on your particular needs and the asset type you wish to invest in. If you wish to buy a property for a limited number of years or you are buying a property to benefit from its annual rental yield, leasehold should be your preferable option as the cost would be considerably less compared to freehold. Similarly, the cost of leasehold for 30 years will be less than that for 99 years. Leasehold is common in many established overseas markets for high-rise apartments and integrated communities. This represents a benefit for owners in Dubai particularly as certain owners may visit infrequently and ‘forget’ to pay their maintenance bills. Under leasehold tenure contracts, the landlord could apply for an eviction order after a long period of non-payment, therefore safeguarding the integrity of the whole property or community.

Q Judging from the property classifieds, rents in Dubai Marina haven’t gone down much at all. Some even seem to have risen despite more supply coming on to the market. I’d like to buy an apartment to live in at the Marina; I’m just wondering which towers and areas of the Marina are the best options for long-term appreciation?

A During Q3 2009, Dubai Marina apartments witnessed a noticeable increase in rental rates, fuelled by the increased demand from visitors and tenants from Dubai and Abu Dhabi. This factor provided sellers and landlords with room to reconsider their offered prices with the aim of maximising their return on investment. Estimating long-term capital growth requires some careful thinking. This is where certain considerations such as location, property type, views, quality of structure, fit and finish, amenities, developer reputation and an estimation of future demand are taken into account.

You should seek some professional advice from property consultants. Given your personal objective is to maximise capital appreciation, I would recommend you consider towers in the central part of the Marina next to JBR (e.g. Al Sahab or Marina Promenade towers), and minutes away from The Walk.

Q I’m thinking of leaving my job and setting up a small company in a free zone. I’ve been impressed by some commercial buildings at Jumeirah Lakes Towers (JLT) as I do a lot of work in Abu Dhabi. Should I get a multiple-year lease at a discounted rate, or opt for something more short-term?

A I believe that the recession may be the best time to start a new business as you will be able to generate great savings and benefit from the reduced inflation rates which can impact your start up costs. JLT enjoys a strategic location and has a fantastic master plan. It also has a good balance between office and residential space.

Office tenants have the tendency to relocate less frequently compared to residential tenants due to cost of relocation, interior design and building client familiarity with their location. Since you will be able to obtain a better bargain from a long-term lease, I would suggest you opt for the multiple-year lease contract at a discounted rate which will only help reduce your set up costs and overheads over time.

Real estate legal advice a growing sector

Dubai – Real estate legal services are becoming more popular among existing investors and prospective buyers in Dubai.

Dr. Ali Al Jarman, legal partner – Harbor Real Estate and founder of Prestige Advocates, says real estate-related enquiries have increased since the 2008 financial downturn. “Many of our clients have serious concerns over the security of their real estate investments,” he says.

Prospective buyers are also seeking out legal advice prior to making transaction. “This was not the case in previous years and also contributed greatly to the problems that clients are facing as proper due diligence was not conducted prior to the sale and purchase of property. Most enquiries are usually concerned with the real estate regulations and legislations such as the date of completion of a project, delay penalties, invalidity of the contract, cancellations and payment commitments.”

RERA (Dubai’s Real Estate and Regulatory Agency) has recently proposed a free legal advice service for buyers and sellers, an initiative that Dr. Ali applauds: “We believe that this innovative policy could also assist in boosting the confidence levels in the real estate industry,” he says.

Dubai’s properties need people

The emirate’s real estate sector can only pick up if Dubai’s population grows, says a new study. Transparency and better customer service are also essentials.

Dubai’s real estate market is facing a massive oversupply, and will need a quick growth in the emirate’s population in order to recover, according to the latest report released by property broker Harbor Real Estate.

“In 2010, oversupply will be an issue in the market. An estimated 60,000 residential units and 30 million square foot of office space are coming on stream by the end of 2011,” the report said, adding that Dubai Marina and Jumeirah Lakes Towers alone were expected to see around 10,200 new units in the next two years.
Dubai’s population declined between 5 percent and 8 percent in 2009; the city will need to see a growth in its population to increase property demand and “kick start the industry again,” the report said.

It’s also not going to be easy to attract existing investors. Demand last year was dampened by the lack of available credit and the tightening of lending rules by mortgage lenders. In 2010, investors are expected to be extremely cautious, the report said.

“Gone are the days of the easy sale to the investor. Simply put, many people have been hurt by the real estate price correction. In effect, they have developed a risk aversion, which will take some time to overcome,” it said.

One of the key things essential to increase the confidence of consumers in the market is to increase transparency, the report said. Currently, laws and regulations about disclosure are limited.

“Investors, especially those from overseas, need to feel that their rights will be protected and, in case a dispute arises, resolution will be equitable, accessible and timely,” the report said.

The timely release of economic data will also help people assess the feasibility of their intended investments.
“Buyers, particularly those with cash are the new kings. This year, real estate professionals will need to serve the customer and serve them well. The main drivers of buyer dissatisfaction have been in the areas of knowledge, consultative ability and empathy. This responsibility does not only lie with brokers but also with developers who must ensure that end-consumer needs are understood,” the report said.

Dubai’s authorities have already started taking measures to regulate the emirate’s property market. Most recently, Dubai’s Real Estate Regulatory Agency (Rera) said on Sunday that it has signed a new deal with the Ministry of Labor to officially recognize real estate brokers as a separate professional category. Labor cards and residency visas issued to brokers will now include their designation, instead of categorizing them as sales staff. The authority said that the move would help to remove bogus brokers from the market.

“This is the first step towards a complete classification of the real estate professions in Dubai,” Marwan bin Ghalita, CEO of RERA, said in a statement, adding that the move will promote “transparency and professionalism” in the property sector.

In 2009, Rera announced that property developers in Dubai will have to pay the complete land price before selling off-plan developments and will also need to inject at least 20 percent of the project’s value before beginning construction.

Late last year, the Dubai Land Department also said that it was planning to introduce a new law to protect the rights of property investors during the first quarter of 2010.