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While not everyone has been asking the right questions, the market has become more mature in terms of what buyers are looking for. ''Buyers before were quite happy to buy from nice pictures, but today they want to see the floor plans, unit layouts and the quality,'' says Matthew Green, Head of Research and Consultancy at CBRE Middle East. ''So developers have to build show homes.''
While the average buyer in Dubai is now a lot more savvy, Paul Christodoulou, COO of Aqua Properties, says there is also a big change in what developers are offering.
''Buyers ask a lot of questions, they even want to know who the contractor is and demand to choose the unit according to building, floor and views — and get exactly that,'' says Christodoulou. ''The market has scaled up, the laws are in place, and sellers and buyers are more aware—they're actually buying homes, not bits of paper.''
Some developers confirm the trend.
''We have utilised this advantage [in-house expertise] to ensure delivery of top-quality finishes in our properties at the most affordable rates,'' says Rizwan Sajan, Founder and Chairman of Danube Group. ''Our 23 years of experience in the construction industry also helps us identify and appoint the best contractors for our projects. This is where consumers have found resounding confidence in buying property from us.''
The search for quality extends from off-plan into the ready housing market, where buyers are also looking for something outside the box. Christodoulou compares Dubai's maturing market to the UK, where 100 years ago Victorian town houses were all the same, but now look different because of many modifications.
''It's the same here,'' he says. ''People now have had time to make home improvements to their apartments and villas. Upgraded villas will sell for more. Unique properties are coming along.''
Buyers are also not just after the looks, but are now scrutinising the fine print. In the heady days of the property market, few buyers seemed to have had any knowledge or cared about how a sales and purchase agreement (SPA) or service fees were supposed be structured. Today, investors are actually reading contracts and criticise contents where applicable.
''Mature buyers ask. They have short memories but they certainly learnt some lessons, meaning developers have to up their game,'' says Green. ''You need to have your info pack, including service charges, available. In residential transparency still is a bit of a hit and miss.''
He says further that buyers now actively participate in structuring the SPA.
''They also want to see more clauses, the kind which addresses potential penalties in case a developer hands over late, or if unit sizes change outside the set boundaries,'' says Green.
Service fees and cooling costs remain a key question for investors, he points out, as they could potentially eat up as much as a third to half of a potential rental income.
''Developers should have an indication at least; it's a key area to ask for,'' says Green. ''Some pass on the cost of infrastructure, such as district cooling if they can. And tenants or landlord end up paying the cooling charges if there is no split air conditioning.''
These days instead of pitching service and maintenance fees too low to attract buyers, reputed developers are rather setting them a little higher on signing the contract to be on the safe side.
In the case of Nshama's Town Square, it gave a nonbinding estimate for its apartments at market average. For the town houses it followed rates of more established communities, although it would probably end up being lower.
''Service fees remain a challenge,'' says Green. ''Certain developers will know because they have a track record and have been delivering projects so they know from existing ones. But new entrants would probably not tell you, as they don't have that level of transparency.''
Writing an SPA
According to Niall McLoughlin, Senior Vice-President at Damac Properties, developers have to supply a whole host of documents as per Dubai's Real Estate Regulatory Agency regulations.
''Our pre-SPA, the reservation form, is 57 pages,'' he says. ''It sets out service fees, basic areas, common areas, etc. to protect the investor.
''We say to potential customers, ‘if you don't want to buy from us, fine, but make sure you ask the developer you're buying from for these documents before you sign an SPA'.''
Financial intelligence is also a key asset among market stakeholders.
''We live in a maturing market where real estate brokers, homeowners and investors are now savvy,'' says Christodoulou. ''They do their homework and have an entry and exit strategy. There are very few flippers around.''
Developers therefore are structuring service fees and maintenance charges to deliver value.
Damac Maison, for example, sets its service charge at Dh16.25 per square foot, while competitors are running at Dh32, says McLoughlin. The developer also claims that it provides facility managements services to around 30 of its other buildings on top of its contractual obligation.
''This is not our main business — we're a developer,'' says McLoughlin. ''It's a value add so we can operate at a marginal cost basis, as opposed to pure facility management companies.
''Like our hospitality division, we're running facility management on a cost recovery basis to add value to our customers, so they buy from us again. We don't have to earn millions of dollars from it at this stage.''
Source: Nicole Walter, Special to Property Weekly