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Dubai: Some property buyers in Dubai may have been spooked by the soft market conditions prompting them to look for a quick exit despite “firmly positive” market conditions, analysts and brokers say. Such instances are not just happening on those sold as off-plan in the last 12 to 18 months, but even on older properties in such well-established locations as the Springs, Meadows and Greens.
Nothing is more injurious to the general well-being of a property market than to see a sudden rush of distressed transactions taking place in a short span of time. They do tend to weigh heavily on overall buyer/seller sentiments. In the buyers’ case, it could put doubts on whether he should go in now or wait longer for a ‘better’ deal to come through later. If this results in longer sales cycles, it could inject a further dose of uncertainty into a soft market.
That is why industry sources have been quick to point out that those “quick-exit” sales taking place now are isolated instances and not part of a general trend. “Whatever ‘distressed’ sales are happening are driven by investors wanting a quick exit and not from end-users,” said Chandrakant Whabi, CEO at Acrohouse Properties. “Even then their asking prices have not come down by more than 5 to 7 per cent from what these [completed] properties were being quoted at the market’s peak in early 2014.
“A 5-7 per cent drop in asking prices does not constitute a sharp correction for the overall market to be concerned about.
“Even otherwise, such sell-offs are clearly isolated instances and do not reflect the broader sentiments in the marketplace, which are still firmly positive.”
According to sources, “distressed” sales can happen irrespective of whether market sentiments are subdued or frothy. It is brought on by the financial circumstances of the property’s owner at a particular moment, which could force him to try and make an exit in the shortest possible time
The other key point is that property values in Dubai are nowhere near the “negative equity” mark, where an asset price drops below what it was bought for. It did happen in 2009-10, but was quickly corrected as soon as the market started moving back into positive territory from late 2011 onwards.
The sell-offs that are happening now should also be viewed in context, sources add. “It is only recently — after almost six months of slow sales volumes — that we’ve started to see the trend in price reductions take place,” said Mehroz Majeed, Residential Consultant at Better Homes Real Estate — Marina Branch.
“These price reductions have happened across the market … including well-established areas though we haven’t seen a particular focus on any mature or new area in particular.
“Interestingly, part of the reason we’ve seen this continued low transaction volumes is because sellers have not been willing to lower their prices in many cases.
“Buyers, meanwhile, who can see the market has softened are expecting reductions which have not really materialised. As a result, transactions have not concluded because this will only happen when the expectations of buyer and seller come together — either in a growing or a slowing market.
“Today, while we don’t see a lot of distressed sellers, we have seen properties sold at reduced prices, and [these] price reductions have come along slowly and cautiously.”
As such, overall transaction activity in Dubai has come down significantly since the second half of last year. But developers, as of now, are maintaining a steady pace of off-plan launches trying to pull in whatever investor interest that is present out there.
This could make for an interesting situation for a prospective buyer. Should he opt for an off-plan buy and which could be delivered in two or three years, or should he divert his interest on a ready secondary market purchase from a seller who is willing to “compromise” on his demands? Or will developers start offering more favourable pricing and payment terms given the emergent competition from the secondary market?
Source: Manoj Nair, Associate Editor, gulfnews.com