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Dubai: Quite contrary to the popular perception, property and land transactions in Dubai actually perked up nicely in the last two months of 2014. Most pertinently, and which will have an impact on the longer term health of the realty sector, the majority of these transactions took place in the secondary market for completed or near-complete properties.
“After recording the lowest transaction value level of Dh1.4 billion for 2014 in October, there was a big jump in November, by 18 per cent month-on-month, to Dh1.64 billion,” said Chandrakant Whabi, CEO of Acrohouse Properties, a real estate services firm. “And the best part is that the upturn continued into December deal sentiments — totalling Dh2 billion plus.
“Some of these involved large-sized land deals, but even if we exclude that, property-specific transactions would be in the range of Dh1.75 billion, a 7 per cent increase over November’s.” (The estimates are largely based on transaction values recorded at Dubai Land Department and Acrohouse’s own estimates.)
And to give a perspective to the general tone of activity in the last few months, in December 2013 — when outsize buoyant sentiments took hold of investors — Dubai’s transactions were a staggering Dh3.2 billion. For 2013 overall, average monthly transactions were in the range of Dh2.6 billion.
Industry sources are hopeful that the pickup in activity can be sustained into the early half of this year. According to Andrew Chambers, CEO of GGICO Properties, “There’s clearly no panic selling happening in the market. In general, many sellers are taking their properties off the market because the premiums that were there six months ago are no longer there.
“Also, the gap between the asking price of the seller and what’s being offered for that property by a potential buyer had widened. Again, this was making sellers cautious about entering a deal now.”
According to Whabi, a best-case scenario would be for the first two months of 2015 to be at or above the levels recorded in November and December. If that happens, it could set the base for a gradual increase in property values, with the emphasis being on “gradual”.
Available evidence suggests that recent purchases in the secondary market are led by end-users. While there is more mortgage facility available to them, a growing number of the purchases by end-users are being made using their own cash resources. “Only clients with the ability to invest large amounts have been able to make use of the currently available opportunities,” said Whabi.
“After accounting for the mortgage cap, transaction fees, making provisions for the difference in valuation, a buyer is expected to inject large amounts of his own cash if he wants to buy. For property priced at more than Dh5 million, it is approximately 45-50 per cent of value. How many end-users can really afford to put up that kind of money?”
Developers, where they can, are also structuring their payment plans in way to bring in budget-conscious end-users. “If developers can convince potential buyers that the size of their monthly instalments will not prove a heavy burden, they can instantly tap into a ready buyer base,” said Rizwan Sajan, Chairman of Danube Group. “That’s the big new market waiting to take off — those residents who are tenants making the switch to owning their homes.