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After the stress and strain of 2008, no one in the property sector wants to even contemplate the words bubble or crash. But recent reports suggest all is not well as several smaller brokerage firms have gone bust and many of the larger ones have been laying off agents. This situation is likely to worsen in the next few months.
So is Dubai's real estate sector in danger again, or is there a more logical, less dramatic scenario playing out? ''The market's slowdown is not something new,'' says Dounia Fadi, Managing Director of UAE real estate firm Elysian. ''The number of transactions has dropped since the second half of 2014 compared to 2011-2013, however, we have also noticed a steady turnover of deals both in sales and leasing.
''The maturity of the real estate market in Dubai and its investors will surely impact some brokerage firms because customers are now looking for professional estate agents and not just anyone who can open a door. It is now clear that Dubai on the whole will see slow, steady and positive capital gains as long as there is no global financial catastrophe.
''Stability in the region, concessions to [the] Russian economy and the cooling off in Chinese financial markets will all benefit Dubai and make it an attractive option for investors. Higher oil prices will also help.''
However, other local experts are not sure that things are going smoothly.
Juwaad Beg, CEO of Al Madina Al Raeeda Real Estate, a developer that does a lot of its own sales, says there has been a virtual disappearance of secondary market transactions, impacting more than 80 per cent of brokerage firms. He says only agents who can rely on a committed clientele base can hope to survive this blip.
''There were way too many who had entered the industry when they saw easy money coming in during 2011-14, and the impression was that it would sustain itself all the way through to 2020,'' he says. ''Clearly, that didn't happen and smaller firms who had taken on too many suffer disproportionately.''
This point of view echoes a comment made at the end of last year by Marwan Bin Ghalita, the CEO of the Real Estate Regulatory Agency (Rera), who noted that Dubai had too many real estate brokerage firms for the size of its property market. At the time, he was unveiling new regulations to reduce the number of firms operating in the emirate. Ghalita said 567 brokerage firms were established in Dubai last year, which brought the total to 2,205. Since the reforms revealed by Ghalita started to take effect, this number has dipped to around 1,500.
The mood from the frontline appears to be one of nervousness. M. K., who works for a well-established real estate firm in Dubai, says a couple of brokers had been let go and other colleagues are feeling insecure. ''There is definitely a tightening of belts from management and they seem to be seeing how things turn out,'' says M. K., who requested not to be named. ''It's not panic, but there is an uneasy feeling. I think most people are just crossing their fingers.''
It is not just property agents who are gearing up for hard times. Specialist surveyors are worried about being laid off as companies slash costs to survive the market slump. ''There's always a lag of around four to six months between the drop in transactions and the same being felt by specialist surveyors,'' Robin Teh, Country Manager at Chestertons Middle East and North Africa, earlier told Gulf News. ''Banks are one of the biggest sources of business leads for survey-related activities, and those are going to come down as there are fewer buyers scouting around for property in secondary market deals.''
However, there are more temperate voices on the state of the industry. Oriol Font, CEO of Dubai boutique real estate firm Luxhabitat, is confident the market is only experiencing a natural correction in certain residential areas and property types. ''After four years of growth I really believe that any real estate market should experience a correction to balance demand and supply and adjust price levels,'' says Font. ''If this doesn't happen, the risk of oversupply and price inflation is extremely high. The number of transactions is lower than last year but volumes are still significant.
''The problem is that in correction times, selling is more difficult and requires more sophisticated knowledge and skills. It is not as easy to sell as it has been in the past couple of years, however, if you are focused, have in-depth knowledge of the product, access to a strong network and the right branding and marketing platform in place, you will sell.
''It is all about quality of the product and pricing. At the right price, sales will happen and therefore you need experts of the area where the property is located who have the knowledge to do a proper valuation and advise the seller effectively.''
He says that the volume and value of transactions at Luxhabitat are similar to last year, as well as the sales size. ''The main reason is that we are specialists in our business and focused only on high-end residential. In difficult times, sellers want to be advised by the best in the business and we believe we are one of the few in the market that is able to source high-net-worth individuals constantly.''
Rera has been doing its bit to tighten up the industry and ensure its sustainability. Dodgy practices that many say have had a negative effect on the sector for years are being tackled and the agency is now in the process of weeding out rogue agents by cancelling broker ID cards and making registration linked to an Emirates ID instead.
Read more on the curbing volatility of Dubai Property Market
Source: Emma Procter, Special to Property Weekly