Harbor Real Estate Blog

30-May-2010 - Emirates Business 24-7

Fall in Abu Dhabi villa prices slows

Properties continue to attract more tenants than buyers.

Decline in villa prices in Abu Dhabi has slowed in the first quarter 2010, as prices fell five per cent in comparison to the fourth quarter of 2009, real estate consultants said.

Prices fell 15 per cent in the fourth quarter 2009 compared to the third quarter 2009, they added.

Mohanad Alwadiya, Managing Director, Harbor Real Estate, said: “Although villa prices in Abu Dhabi have come down on an average of five per cent in the first quarter of 2010 compared to the fourth quarter of 2009, the real estate sector continues to attract more tenants than buyers.”

Paul Maisfield, General Manager and Head of Professional Services, Asteco, Abu Dhabi, said: “Abu Dhabi is still very much a rental market. Like the previous quarter there have been some rental reductions in the villa market and this has been particularly pronounced at the upper-end of the market.

“With respect to hand-over of Golf Gardens, our research shows that about 70 per cent of these villas are being made available for rent, with the remaining 30 per cent occupied by property owners. Moreover, approximately half the villas that have been rented out to date are company contracts.”

According to Asteco, close to 3,800 villas are specifically being developed for the leasing market, which are due for handover in 2010.

“Majority of that will consist of low-to-mid-quality stock in Khalifa City A and B, and Mohammed Bin Zayed City. We expect many of these to be sub-divided into smaller units, making it difficult to predict how many residential units will actually come onto the market in those areas,” said Maisfield.

“A large proportion of villas at Golf Gardens have come onto the rental market. The majority of tenants in this development are western expatriates.”
Alwadiya said: “We are noticing that majority of villa projects are being offered for lease-purposes with the estimated ratio reading 70 per cent for lease-purposes and 30 per cent for sale.”

He said the overall appetite for buying properties has dropped. “Although we have noticed an improvement in the mortgage offers during 2010, the end-user funding options are still not attractive enough.”

Loshini Lawrence, Operations Manager, Better Homes, Abu Dhabi, said: “There is a high demand for rentals at the moment. Given the current sale prices, high bank interest rates and lack of ready to move in freehold properties, rentals still tend to be on the increase.”

However, once the market receives more good quality and location inventory and banks start to lend more aggressively, the market will experience a slight change in terms of the buyer interest, she said. “Selling prices will always play a key role in market dynamic.”

According to Asteco, “On an average, allowances tend to be in the region of Dh300,000 per annum to Dh350,000 per annum for senior management positions. Consequently, five-bedroom villas quoting above Dh400,000 per annum are struggling to let and prices have fallen to more realistic levels, with some five-bedroom villas now available for less than Dh330,000 per annum.”

According to Asteco, the handover of the first phase of Al Reef villas revealed that new landlords have mortgage commitments and that they are looking to secure tenants early in order to avoid vacant periods. “As more phases are handed over in the next few months, rents in this development are likely to come under increasing pressure to drop further,” said Maisfield.

Harbor Real Estate said that current rentals for three-bedroom villas average Dh255,000 per annum, for four-bedrooms Dh280,000 per annum and five-bedrooms the average is Dh385,000 annually. “These rental prices are down by approximately 25 per cent from the same time last year.”

According to Better Homes, at Golf Gardens, villas can be leased from Dh310,000 per annum onwards, at Al Reef Villas, two-bedroom villas rent for Dh110,000 per annum. “This is approximately 15 per cent to 20 per cent down for the corresponding period last year.”

Asteco estimates around 5,500 new villas will be delivered to the Abu Dhabi real estate market during 2010. “Compared to some villa developments in Dubai, none of these developments can be considered high-end, except Hills Villas in Officer’s City. Areas such as Khalifa A and Mohammed Bin Zayed also have about 2,000 villas each in various construction stages. Most of these villas are owned by UAE nationals and held for investment purposes. The villas, which will be owner-occupied by UAE nationals, tend to be of high quality,” said Maisfield.

Alwadiya also said around 5,500 villa units will be supplied in 2010 with large numbers coming from Golf Gardens, Al Raha Beach and Al Reef Villas.
Asteco said the firm has not seen any significant fluctuation in completed villa prices over the past three months. “From an investment perspective, based on current prices, large villa developments of Al Raha Gardens, Golf Gardens and Al Reef are, on average, all achieving gross yields of about nine to 10 per cent,” said Maisfield.

Lawrence, however, said that prices were on the decline.

Alwadiya said that in the fourth quarter of 2009, villa prices continued to drop by an average of 10 per cent in sale prices and up to 15 per cent in rental prices. He added that prices have fallen on an average of 15 per cent in the last quarter compared to the previous quarter. “This provided evidence that escaping the effects of the global economic crisis is impossible for any economy, no matter how strong its fundamentals.”

“In the first and second quarter of 2010, the decrease in villa prices in Abu Dhabi started to soften. According to our records, the average decrease in villa prices in Abu Dhabi is at five per cent for sale prices and eight per cent for rental prices in the second quarter of 2010. On the main island, west and east districts are demanding a steep premium of 27 per cent for villas compared with similar sized units in the off-island districts,” said Alwadiya.

“Moving forward in 2010, as the UAE continues to emerge from the economic crisis, and as lending options become more available and affordable, we expect the demand for villas to start picking up again and this will help the prices stabilise after reaching more acceptable levels.”

Meanwhile, real estate agents said Golf Gardens and Al Raha Beach gardens were by far the most expensive villa communities in Abu Dhabi. “Golf Gardens is among the most expensive villa community in Abu Dhabi, although rents have fallen over the last one year by about 25 per cent as landlords’ expectations have fallen to meet the market.”

According to Harbor, the most expensive villas are the Al Raha Beach community and the Golf Gardens community. “On the other hand, the highest priced villas are still within the Nurai Island development, with some of the luxury villas being currently listed at Dh49 million. Also, some of the luxury villas at Saadiat Beach are being listed at prices ranging from Dh8m up to Dh30m,” said Alwadiya.

Better Homes said that currently, the most expensive rental community in Abu Dhabi is Marina Royal with pricing ranging around Dh950,000 per annum.
According to Asteco, villa rentals in the second quarter of 2008 in Abu Dhabi were on an average around Dh200,000 per annum for a three-bedroom, Dh245,000 yearly for a four-bedroom and Dh330,000 for a five-bedroom. “Prices reached a peak in the fourth quarter of 2008 with average rates as high as Dh380,000, Dh450,000 and Dh530,000 respectively for three-to-four-to-five-bedroom villas. Following this peak, prices have, on an average, fallen by around 40 per cent (fourth quarter 2008 to fourth quarter 2009).

“There are only two villa developments in Abu Dhabi, Al Reef Villas and Hydra Village, which are available for investments by expatriates.
“As both are mid-end developments, they are affordable to a larger buyer base that include western, Arab and Asian expatriates as well as UAE nationals.
“The other freehold villa developments were available for UAE nationals who predominantly bought for investment purposes to rent to expatriates.”
Meanwhile, Abu Dhabi continues to attract a larger percentage of villa buyers than apartment buyers. “Depending on the client, most expats purchase apartments or duplex within a building or villas within a self-contained community with a small garden. There is still an interest in well-designed and priced apartments with quality finishes and sea views,” said Lawrence.

Emirates Business 24-7

Stable prices push sales up at Springs, Meadows

Communities have highest sales and leasing activity due to stable prices and rentals, say agents.

Prices of villas in Emirates Hills range between Dh10 million and Dh25m. (SATISH KUMAR)

The Springs and The Meadows have seen the highest sales and leasing activity within Emirates Living since the beginning of this year owing to stable prices and rentals, according to real estate agents.

Vineet Kumar, Head of Sales, Dubai, Asteco Property Management, said: “The Springs and The Meadows have seen increased sales and leasing activity since the beginning of this year as ongoing sales prices and rental rates for these properties have been stable for the past two months.”

According to Mohanad Alwadiya, Managing Director, Harbor Real Estate, between January 1 and March 18, The Springs and The Meadows recorded 66 sales transactions, marking a 50 per cent increase for the corresponding period in 2009.

He said between January 1 and March 18 last year, The Springs and The Meadows saw 44 sales transactions and during October 1 to Dec 31, 2009, 89 sales transactions were recorded.

Sales transactions up

Alwadiya disclosed that The Greens, The Lakes and The Views recorded 79 sales transactions between January 1 and March 18 this year, marking a 103 per cent increase over the corresponding period last year. “The Greens, The Lakes and The Views recorded 39 sales transactions between January 1 and March 18 last year and a total of 109 sales transactions in these communities between October 1 and December 31, 2009,” he said.

Paul Musson, Residential Sales Consultant, Better Homes, said current sale prices for a two-bedroom and three-bedroom apartment with study and maid’s room in The Springs were at Dh1.1 million and Dh2.2m, respectively. “In The Meadows, current sale prices for a three-bedroom and five-bedroom villa with a study and maid’s room are around Dh2.8m and Dh5.4m,” he said.

“In The Lakes, prices are currently at Dh3m and Dh4.5m for a three-bedroom villa with a study and maid’s room and for a five-bedroom villa with a study and maid’s room, respectively,” he added. In Emirates Hills, prices of villas range between Dh10m and Dh25m, but Musson said the villas are not selling at Dh25m. In The Greens, a one-bedroom apartment is currently selling for Dh680,000 while a three-bedroom apartment is selling for about Dh2.8m.

Musson said the bottom-end of the apartment market is still falling slightly in the studios and one-bedroom apartment segments. “The two-bedroom apartments are still holding up.”

He said demand from buyers in the market today was largely for villas and was no longer just price-driven. “Villas are what buyers want now and not just at the best price. Early this year, buyers were only looking for the best price, now however, end-users want the best unit for the best price.”

Rentals on a slide

Tamara Stubbs, Residential Leasing Consultant for Better Homes, said: “Annual rentals in The Springs range from Dh90,000 for a two-bedroom villa to Dh150,000 for a full lake-view three-bedroom villa.”

She said in The Meadows, rents ranged from Dh180,000 per annum for a standard three-bedroom villa to Dh375,000 per annum for a five-bedroom to six-bedroom villa. In The Lakes, annual rents for a three-bedroom townhouse were at Dh130,000 while for an upgraded three-bedroom villa, rents were at Dh160,000.

In Emirates Hills, annual rents are at Dh280,000 for a four-bedroom villa and at Dh400,000 for a four-bedroom to five-bedroom villa. In Dubai Marina, annual rents are at Dh60,000 for studios to Dh250,000 for a four-bedroom penthouse. In The Greens, annual rents are an approximate Dh40,000 for studios and Dh120,000 for a four-bedroom villa.

Stubbs added: “You can get higher rents for different units depending on the finishing and interiors.”

Alwadiya said the current rental prices within the development are lower than those prevailing six months back by an average of five per cent to 10 per cent. “Sale prices in The Greens and The Views are lower by 13 per cent to 15 per cent. But for villas, prices are slightly higher by around five per cent.”

He added: “Due to the decrease in rental and sale prices by around 35 per cent and 45 per cent that this area witnessed during the past 15 months, we have noticed an increase in demand for all the communities within Emirates Living with a focus on The Greens, The Views and The Springs. This trend was carried over during the first few months of 2010.”

Sahali Saleem, Residential Leasing Consultant, Al Barsha, Better Homes said among the communities, The Greens and The Springs had the lowest number of rentals when compared to the other sub-communities in Emirates Living because of the ongoing road construction.”

Occupancies within the Emirates Living district vary from one community to another. According to Harbor Real Estate, occupancy in The Greens is highest at 85 per cent, followed by The Springs with 80 per cent occupancy levels.

The Views and The Links have about 75 per cent occupancy followed by The Meadows which have 80 per cent occupancy. The Lakes currently has about 60 per cent while Emirates Hills has about 55 per cent occupancy levels.

“The rate of people moving in and out of the development is almost equal. Emirates Living did not witness a sharp drop or a drastic increase in population compared to the same period last year. This was mainly fuelled by the influx of new tenants who upgraded their homes taking advantage of the newly reduced prices,” said Alwadiya.

High occupancy levels

According to Asteco, occupancy levels within Emirates Living have been given a push and currently stand at 75 per cent overall levels as many owners held back selling their properties and instead looked to lease them. “Occupancy is quite high as a majority of inventory has been handed over for more than a year. In our estimate, the occupancy level is above 75 per cent as a lot of inventory has been held back for sale and owners have decided to lease their villas. This has given a push to occupancy levels,” said Kumar.

The villas only pay community fees for the use of common facilities such as parks, pool, landscaping, use and upkeep of roads. “This fee ranges from Dh7,500 to Dh16,000 a year. Maintenance of villas, like any other property, is on the owners’ account,” added Kumar.

Alwadiya said: “The community service fee charges for villas and townhouses are more or less the same. For The Greens, service charges continue to increase. However, the option of payment over four instalments was highly appreciated by many owners in the development.”

Asteco said the overall buyer profile of Emirates Living was a mix of families from all over the world. “The development has a strong presence of clients from Europe, Asia, the GCC, Lebanon and Iran,” said Kumar. “The community is ready and offers convenience for occupants. Villas of two-bedrooms to five-bedrooms are popular for family living.”

Alwadiya said: “For The Lakes, The Meadows and The Springs you cannot define a buyer profile. Nowadays we see different nationalities with different professional and income profiles moving into these areas.”

In Emirates Hills, high demand continues from wealthy South Asian, Russian and GCC nationals. “All of these buyers come with very high budgets and ready cash to pay for their luxury dream homes,” he said.

Master plan overview

Emirates Living comprises The Springs, The Meadows, The Lakes, Hattan, Ghadeer, Montgomery and Emirates Hills. The Emirates Living district also comprises The Views and The Greens.

The Greens are mid-rise apartment blocks comprising nine projects in all – Al Sidr, Al Jaz, Al Nakheel, Al Ghaf, Al Samar, Al Dhafrah, Al Arta, Al Thayyal and Al Ghozlan.

The Views are apartment buildings comprising eight projects in all – Arno, Travo, Turia, Una, The Fairways, The Links, Golf Towers and Mosela.
The Springs comprises townhouses built around man-made lakes. The properties in The Springs range from two-bedroom to four-bedroom townhouses and are located close to The Greens, The Lakes and The Meadows.

The Meadows are detached villas offering double-storeyed villas from three to seven rooms, each surrounded by a garden and garage.

The Lakes are detached villas and townhouses comprising Deema, Furat, Maeen, Zulal and The Ghadeer which was the last to be handed over recently. The Lakes has been built around a lake, located near the Emirates Golf Club and The Greens development. Initially, properties in The Lakes were only for rent, but in 2007, Emaar offered freehold titles to the properties, with first refusal granted to the then existing tenants.

Emirates Hills are luxury-detached villas that have been sold as plots to investor to build their properties on.

The community also includes schools such as the Dubai International Academy, Emirates International School, Dubai British School, Regents School, a community centre, restaurants and supermarkets, children’s playgrounds, and communal swimming pools

Emirates Living residents also have access to the Emirates Hills’ Montgomerie Golf Course and its Golf Academy which includes a clubhouse and other facilities.

Article from Emirates Business 24-7

Nearly 10,200 units will be released in Dubai Marina and Jumeirah Lakes Towers alone in the next two years, according to 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 real estate consultancy said in a report.

“The property scene is facing some significant oversupply challenges. With prices in Dubai for residential properties climbing five per cent from the previous quarter, the perception of the effect of looming oversupply, common knowledge to most people, suggests that for certain investors seeking certain property types, the price is just about right. The first quarter results will bear testimony as to whether this is the beginning of a sustainable recovery trend or a minor blip in the stabilisation process.”

However, the satisfaction of demand has been hindered throughout 2009 by the lack of available credit, tightening of lending policies and the inability of potential consumers to comply with such policies, the report said.

In 2010, the increase in the flow of credit into the market place will be gradual at best. In addition to not having sufficient funds on hand for lending, mortgage providers and investment financiers are still not in a position to fully and confidently assess the level of risk they can prudently assume, mainly due to uncertainty, which surrounds the risk inherent in their current loan portfolios. One of the consequences of a recession is that industries are rationalised.

In 2010, consumers and investors will 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.”

Confidence in overall investment opportunities will only be achieved this year with increasing levels of transparency. Industry data and laws and regulations regarding developer disclosure and developer communicaons are the bare minimum. In addition, economic data, released in a timely fashion will assist investors assess the feasibility of their intended investment activity by gaining an appreciation of the economic strategies being deployed.

“The legal framework which surrounds and supports the commercialisation of real estate in Dubai has come a long way. The challenge has been to keep pace with the rapid development of the industry. 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. There has been significant progress but there is still a way to go.”

Rera has been inundated with disputes arising from project delays, cancellations and investor dissatisfaction with alterations to payment plans and has been successful in providing the facility for dispute resolution. The efficient settling of cases will be critical to restoring confidence looking forward.

The balance of power within Dubai’s real estate scene will have dramatically tipped towards the buyer, probably for a long time.

“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.

“In addition, they will need to be creative with regards to how they ‘package’ their product to potential consumers because, in the vast number of instances, the consumer now has a myriad of alternatives. And alternatives for investors will not just be located within the local market or even regionally.”

China, for example, is experiencing a real estate recovery of significant proportions, while other nations such as Australia are also recovering well. In the competition for the global dollar, developers need to understand where they stand in the value comparison and ensure that the mistakes made over the past five years where lack of planning, customer focus and attention to market fundamentals are not repeated, the report said.

Meanwhile, landlords and sellers of existing properties will have a role to play as well. The initial presentation of a property is the key to gaining buyer interest. They will have to understand that every potential customer who is dissatisfied results in less revenue for a landlord or seller. In 2010, the professional relationship between a broker and seller is an important one and if both parties actively contribute and collaborate in successfully selling a property, greater returns can be realised, Harbor said.

Last year has been quite challenging for anyone wanting to obtain a mortgage in Dubai. In response to the global financial turmoil, banks tightened their credit policies, reduced lending ratios and increased interest rates.

“It appers the worst may now be behind us and lenders are once again opening up their credit policies. While obtaining a mortgage is still not simple and may not be so for a while, lenders are now more willing to consider applications. Interest rates are also on the way down. The average rate is now approximately 7.5 per cent, down from about 8.5 per cent a few months ago. As the property market stabilises and banks improve their liquidity, we should see further improvements in the mortgage market,” said the report.

In 2010, Harbor expects to see further industry rationalisation and additional considerations being given to mergers and acquisitions similar to the recently abandoned venture between Emaar and Dubai Holding’s real estate subsidiaries.

“The decision not to go ahead with the merger is an interesting one as it still leaves the question as to what degree of rationalisation and restructuring is still to be undertaken within these entities and throughout the industry as a whole. Clearly, a lot of work is still to be done.

“One benefit that the merger would have provided would have been an increased ability to control supply coming into the Dubai market. It is estimated that once the merger was completed, the new entity would have controlled more than 50 per cent of the supply currently in the pipeline causing anti-monopolists to shake their head in disapproval. But the issue remains as supply in the short term will remain as a prime determinant of any progress made to restoring confidence in Dubai’s real estate industry,” said the report.

The year 2010 will be a challenging one for everybody associated with the Dubai real estate industry. The only exceptions are those who have sufficient cash to buy or invest because they will be in an enviable position to exploit the considerable opportunities arising from recession.

World economies in 2010 will emerge from the recession at different levels. And so will Dubai’s economy. Globally, competition will be intense as every country in the world will be looking to grab a lion’s share of the world’s capital as the recovery gathers momentum. Singapore, Shanghai and Hong Kong spring to mind.

However, competition within the Middle East will be just as fierce. In 2010, infrastructural spending will continue to drive the economy funded by an oil price that will annualise at a price of between $75 (Dh275.25) and $85 per barrel.

The real estate industry in Dubai will continue to be stressed as more projects are completed. The Dubai economy will be reliant upon other forms of revenue-generating activities as the economic model of the emirate is re-configured in response to the new realities. Dubai will need population growth, and fast, Harbor said.

It will be the key to economic prosperity and will be determined by the success of growth strategies in its commercial, trade and tourism sectors. With a population declining anywhere between five per cent and eight per cent in 2009, population growth is the primary factor in generating the demand needed to kick start the industry again, the report said.

CREDIT NOTES POSITIVE FOR REAL ESTATE MARKET

The introduction of property consolidations and credit notes last year by developers has been positive for the real estate market as it has helped many investors gain ownership of a property more quickly than if they had continued to remain invested in a deferred project, Harbor said.

The practice of credit notes and property consolidations has allowed developers to either cancel or delay projects without totally dissolving the investor’s capital. It has allowed investors to realise returns on their investment a lot earlier than if they had continued to remain invested in a deferred project. Even if some investors lost out on some of their investment, taking the bigger picture in view reveals that more projects are likely to be put on hold or cancelled in Dubai.

In such a scenario, property consolidations and credit notes are helping investors to remain invested in Dubai and start to gain a return on their investment. “We will need to wait and see as Rera is assessing which projects are unviable and should be cancelled,” said the report.

Article from Emirates Business 24-7

Laws and regulations introduced under the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, have transformed the emirate into a more mature market and global real estate destination.

“The vision and leadership of Sheikh Mohammed has positioned Dubai as a global city and one of the most renowned business hubs in a record time. His Highness focused on attracting international investors and building a world-class infrastructure which made Dubai, as we know it today, the location of choice for residents, businesses and visitors,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

When it comes to real estate, Dubai set a new global benchmark and has introduced iconic projects to the world that covered all kinds of asset types and interests including the Dubai Media City, Dubai Internet City, Knowledge Village, Burj Al Arab, Emirates Towers, Dubai Marina, Business Bay, Dubai Festival City, Dubai Silicon Oasis, Downtown Burj Dubai, Emirates Living, Dubai International Financial Centre (DIFC), Burj Dubai and the Palm Trilogy.

Sheikh Mohammed’s vision did not start with the real estate developments, he ensured establishing the suitable infrastructure to support the real estate boom and its sustainability. The development of the Dubai Ports Authority, the introduction of Roads and Transport Authority (RTA) and industrial and specialised business zones have contributed to setting Dubai up to become one of the main trading, tourism and culturally rich cities of the world, he added.

Dubai, under Sheikh Mohammed, became the first city in the Gulf Co-operation Council to introduce a real estate regulatory body under the auspices of the Land Department.

The Land Department has continuously strived to keep up with the development and prosperity of the emirate. Through the leadership of Sheikh Mohammed, who always strives to be the best and definitely world-class in everything he plans, guiding with an extraordinary skill, passion and intelligence, the “vision of Dubai” has become the world’s most incredible reality and yet still, there is even more to come.

Supported by Sheikh Mohammed, the Land Department is planning and implementing services to participate towards making Dubai the leading city of the world, the Department said on its website.

The Government of Dubai instituted new rules, regulations and laws in the emirate to regulate the market, to protect the rights and interests of consumers, and to ensure Dubai property investors are assured the highest possible service standards from real estate agents, brokers and property developers transacting business in Dubai and maintain the integrity of all the developments.

The Department launched a number of laws and regulations that regulate the property sector. Starting with Law No7 concerning land registration in Dubai, Law No3 concerning areas of properties that can be owned by non-UAE nationals in Dubai, Law No8 concerning property trust account in Dubai, Law No 85 concerning real ease agent regulation and the upcoming strata law.

Alwadiya said: “The young Dubai property market has come a long way with regards to regulating the real estate industry. While the efforts to protect rights, lift standards of professionalism and establish a transparent, credible and functional framework are to be applauded, there is still a long way to go before the industry can be said to be in the final stages of maturation.

“Over the past years, the government has adopted numerous legislations and regulations to protect everyone in the real estate sector, and most importantly establish a safe environment for investors. Dubai has proven to be the world’s greatest improver in terms of real estate transparency over the past two years. With the establishment of regulatory bodies such as Rera, investor representative bodies, the establishment of codes of practice for real estate practitioners combined with laws relating to freehold ownership, escrow accounts and strata titling, Dubai has reduced drastically the concerns of expatriate and foreign investors,” he added.

Transparency has also been given a boost with the introduction of the credit information law, a positive step towards transparency and risk mitigation for banks. The law will create a framework of rights and obligations for data providers, information users and individuals alike, Alwadiya said.
Saeed Mirsaeedi, Investment Manager of Sherwoods Real Estate, said: “Introduction of new laws has been a positive development and has helped Dubai’s emergence as a mature and prosperous economy.

“Clear-cut regulations and increasing transparency make Dubai property most attractive to overseas investors,” he said.
Although previously non-Gulf Co-operation Council expatriates were only permitted to rent property, or own property on a 99-year leasehold basis, all changed in 2002 when the Dubai Government took the initiative and permitted the ownership of freehold property to expatriates. This bold initiative changed the perception of the real estate industry in the Middle East and the Gulf.

The Dubai Government began the promotion in 1997 by setting up Emaar Properties. The next year, Emaar began work on Dubai Marina followed by the Emirates Living Community developments such as the Springs, the Meadows, Emirates Hills, etc. However, the major property boom in Dubai occurred in May 2002, when Sheikh Mohammed issued a decree to allow foreigners to buy and own freehold property in selected areas of the city, now referred to as New Dubai.
On March 14, 2006, Dubai’s Government issued a law legalising foreign ownership of properties in designated areas of Dubai.

“It was the adoption of freehold tenure in general, and foreign ownership in particular, that sparked the great real estate boom in the Dubai property market,” said Alwadiya.

The introduction of the freehold law by the Ruler transformed Dubai into a true success story capturing the imagination and admiration of countries worldwide. Many countries followed the Dubai model and benefited greatly from its visionary experience.

Dubai has developed several iconic real estate projects, which have acquired international recognition, marketing the emirate as a destination of choice for business and travel and for investment in real estate.

The Palm trilogy and other iconic projects such as The World have put Dubai in international limelight. Furthermore, prospective developments of creative concepts, which are likely to attract significant visitors in the coming years, continue to take shape. Burj Dubai, the tallest tower in the world, will be opens today. Although Dubai International Financial Centre formally opened as a global financial centre in 2004 with the aim to become the global hub for financial services in the Middle East, it has also emerged as one of the most expensive addresses for real estate in the emirate.

In fact, property prices on residential units in the DIFC are becoming increasingly comparable with the leading capitals of the world. Dubai’s real estate industry dynamics are firmly entrenched in Dubai Strategic Plan, which strives to achieve a medium-long term objective of diversifying the economic base of the emirate in key growth areas, which have been defined as priority sectors within the associated blue print. Of particular significance is the focus of the plan on the real estate development and the construction sector, as well as travel and tourism, with the former providing necessary infrastructure for growth of all other businesses, and the latter ensuring sustained economic buoyancy through continuous and aggressive growth in visitors to the emirate.

The investor-friendly business environment in Dubai has promoted not only businesses but also a demand for office space, and the high real incomes have ensured that the labour force is increasingly imported from abroad, thus catalysing requirements for housing and retail.

Iconic projects

Dubai has introduced some of the most iconic destinations that cater for different lifestyles and asset categories. Some of them in the business and commerce segment are the DIFC, Business Bay, Dubai Internet City, Dubai Media City, Knowledge Village, Dubai Silicon Oasis, Dubai Maritime City, Tecom, Jebel Ali Free Zone and Dubai Healthcare City.

In entertainment, lifestyle and culture segment falls the Dubai Festival City, Downtown Burj Dubai, Emirates Living, Dubai Mall, Ibn Battuta Mall, Palm Jumeirah, Burj Dubai and Dubai Marina.

Article from Emirates Business 24-7

Residential real estate prices are likely to stabilise in 2010, with buyers investing for the long term, according to property agents.

“Prices across villas and apartments will stabilise in 2010. Moreover, buyers investing in residences in Dubai will enter on a long-term basis, indicating a less speculative interest in the emirate,” said Mohanad Alwadiya, Managing Director of Harbor Real Estate.

However, challenges to the real estate sector continue to remain. Alwadiya said: “While mortgage financing is easing, it is still limited in availability. Banks are lending but only to people with certain fixed profiles and according to rigid criteria. For example, people working in the real estate sector find it hard to source funding because of the risk associated to their job. Also, infrastructure in many developments needs to keep pace with the progress of the development.”

Vineet Kumar, Head of Sales at Asteco, said: “The buying trend has been towards ready properties, and mortgage finance is available for most projects from leading mortgage providers. Interest rates are in the range of 6.5 per cent to 10 per cent. Occupancy levels in developments handed over are generally in excess of 70 per cent. Locations such as Dubai Marina and Downtown Burj Dubai are being preferred by young families, while larger families have a preference for large villas in locations such as Emirates Hills and Jumeirah Islands.”

Just ahead of the new year, Emirates Business picked 12 residential projects in Dubai that received interest from potential property owners and tenants in the past 12 months. Some of these projects saw increased sales and rental transactions while some projects, such as Burj Dubai by Emaar Properties and the Villa Project in Dubailand by Al Mazaya Real Estate, are gathering a lot of interest just ahead of their handover.

Other major factors noted have been population shifts from other emirates and other developments in Dubai’s Discovery Gardens and International City projects.

“The reason for this is the attractive rental prices within these developments. In fact, recently, large corporates have looked to lease multiple units for their mid-level staff in International City,” said Alwadiya.

“The Motor City development, too, has witnessed an increase in occupancy rates from end-users and tenants seeking affordable and value-for-money residential units. Influx of people from neighbouring emirates, such as Sharjah, Ajman and Abu Dhabi, has further fuelled growth in occupancy rates within the development.”

Article from Dubai Real Times: Official Magazine of RERA

Mohanad Al Wadiya, Managing Director of Harbor Real Estate Brokerage, shares his thoughts on upcoming mergers

For many players in the local market, mergers and acquisitions appear to be a logical solution to stay afloat during the global financial crisis. Opinion is divided as to whether these mergers and acquisitions will have a positive or negative impact in the short and medium terms, and it is too early at this stage to predict success or failure. Nevertheless, it seems clear that without these actions, the result would be a freeze in financing facilities and diminishing activity in the property sector, which would have an adverse effect on the overall economy.

Within the financial sector, these kinds of mergers really started as early as last year. It all began when Amlak and Tamweel announced a merger to create Emirates Development Bank in November 2008. The new bank will have access to federal funds and hopes to strengthen the UAE’s home finance sector. The merger news gained considerable media attention and created veryhigh expectations.

In terms of property development, we have seen similar mergers within the last year. Dubai World, the major property and ports conglomerate, recently consolidated its management and property operations of Leisurecorp, Dubai Maritime City, and the Dubai Multi Commodities Centre, all of which it owns. The property divisions of these companies will now be run by Nakheel, another property arm of Dubai World.

There is also continued discussion of a merger between Deyaar Development and Union Properties, with news about the latter having liquidity problems and losing its long-time chief executive recently.

While these developments are important for the sector, the most significant merger in the region is currently being discussed between Dubai Holdings’ ‘Big 3’ companies and Emaar, a most popular developer in the Middle East. Dubai Properties, Tatweer, and Sama Dubai—collectively known as ‘The Big 3’—are fully-owned subsidiariesof Dubai Holding Commercial Operations, a holding company of Dubai Holding Group with total assets of Dh126bn at the end of 2008, as quotes by Emaar.

There is a growing consensus among the officials involved that allowing healthy businesses to acquire companies in jeopardy of failing could stabilise the economy by bolstering confidence in both the financial and property sectors. For some of these companies, merging with a partner that has a strong balance sheet is a pressing and essential step in preventing dissolution. Other benefits include leveraging economies of scale and having stronger negotiation positions with regard to suppliers and contractors. The mergers will allow companies to work together to achieve long-term, strategic benefits by uniting complementary businesses into a single, sufficient and more successful operation. For the property sector, these mergers will also allow consolidated companies to have better control of the overall supply introduced into the marketplace and the quality of the products and services offered. This will definitely have a positive impact on the market in the long run.

On the other hand, there are concerns that these mergers will place heavy burdens on the stronger companies
involved. These partners are not just taking over assets, but may also be inheriting large liabilities and debts. Furthermore, these mergers are likely to generate a lot of uncertainty among the investors and shareholders involved. Investors might have to accept further delays until these mergers are finalised, and will then have to evaluate the impact of the mergers on their investment.

Whatever the impact, the number of mergers involving financial and property organisations is increasing. For these new companies, the ability to provide prompt, transparent, and practical information that guide all stakeholders through the merger process and expected outcomes could make the difference between success and failure from the public’s point of view.

Article from Emirates Business 24-7

Villlas in The Meadows, Jumeirah Islands and Arabian Ranches have seen increased sales transactions in the past one month. Among apartment buildings, Dubai Marina, Jumeirah Beach Residence (JBR), Downtown Burj Dubai and Jumeirah Lake Towers (JLT) have recorded the maximum number of sales transactions.

“Among villas, Meadows, Jumeirah Islands, Arabian ranches recorded the highest transactions, while from an apartment perspective, Dubai Marina, JBR, Downtown Burj Dubai and JLT have recorded the highest transaction,” Peter Penhall, Chief Executive, Gowealthy.

Gowealthy recorded 20 per cent incremental growth in transactions for November, from October figures.

Vineet Kumar, Head of Sales, Asteco Property Management, said: “The top three residential areas, which have witnessed the most transactional activity in the month of November for apartments sales, have been The Palm Jumeirah, Dubai Marina and Downtown Burj Dubai areas. “The locations which witnessed the most transactional activity in the month of November for villa sales are The Emirates Living Area, Arabian Ranches and The Green Community.”

Kumar said the total number of transactions Asteco supported in the month of November was 48 individual sales. However, some of these transactions were single investors purchasing multiple units so the overall unit numbers were higher than this.”

Liz O’Connor, Director-Residential Sales and Leasing, said: “From a sales perspective, among the villas, Springs/Meadows, Jumeirah Village, Jumeirah Islands stood apart and in the apartments category, it were Downtown Burj Dubai, Jumeirah Beach Residence and Dubai Marina.

“From a rental perspective, Emirates Living [Springs, Meadows, JLT, Discovery Gardens, Jumeirah Village], Marina [JBR, Marina], Dubai Land [Arabian Ranches, Motor City, Sports City] have recorded high number of transactions.”

The sales were about 40 and leases are about 250, according to Better Homes.

According to Mohanad Alwadiya, Managing Director, Harbor Real Estate, Emirates Hills Third and Palm Jumeirah are the areas that have recorded maximum transactions.

According to Penhall, predominantly South Asian (Indians, followed by Pakistanis) have invested into these areas. The GCC nationals form the next largest set, followed by South East Asians/Chinese. “Most of them were end users and finance buyers,” he added.

According to Kumar, the buyer profile has been predominantly the end user. However, there were a few buyers based overseas who have bought properties for rental income purposes with a view to holding their real estate assets for the mid-term (5-7 years). “The buyers on these projects were mixture of individuals from the GCC countries, Russia, India, Pakistan and Western Europe,” he said.

O’Connor said these areas have mostly seen end-users, pre-qualified for a mortgage but those who have access to additional funds to cover the difference if the evaluation of the property was less. We deal with many cash buyers who are looking for the best priced properties in today’s market.”

With respect to price floor in these areas, Penhall said that for a higher trading areas such as well-located villas in Meadows and apartments in certain towers at Marina, expectations are being met to a large extent due to the relatively higher availability and demand parameters. “The selling prices are neither too far out of present reach-market getting more matured, buyers and sellers are getting quite pragmatic on their price expectation factors.”

He added that however, the point to be noted here is that currently, price factors are an indication of distress levels of individual sellers and should not necessarily be construed as a market price index for a particular type of property in a particular community.

Kumar said the sales activity on these projects have tended to revolve around the owners and sellers of properties who have purchased them in the years prior 2008. “Typically these properties can be sold in today’s market with some expectation of premium,” said Kumar.

Alwadiya said mixed nationalities of end-users and investors have invested into these areas. “In general, buyers are more demanding and careful nowadays compared to last year and the previous years and hence they do enough due diligence before purchasing any properties.”

According to Better Homes, the buyer is always looking for the best priced property/value for money.

“We have not seen major prices changes sine the last three month – prices have stabilized in certain areas and you can always find very well priced properties in all areas of Dubai,” she said.

Article from Emirates Business 24-7

A lack of transparency over the cost of maintaining a building, low quality standards and services and confusion over what is covered by service charges have angered owners and led to many refusing to pay the charges, say industry sources.

Adrian Quinn, Chairman of Dubai-based strata management firm Essential Community Management, said that if a building has service fee arrears of 40 per cent, it would not be possible to continue maintaining it internally or externally.

The available funds would have to be used to make payments to the Dubai Electricity and Water Authority, insurance companies, master developers and district cooling suppliers.

Essential Community provide strata management services to more than 40 developers in Dubai and has worked with master developers Emaar and Nakheel.

Quinn said the major challenge for the strata sector in Dubai is making owners pay the building service fees.

“The delay in the enforcement of the strata law is allowing many owners to avoid paying their strata service fees,” he added. “This is due to many developers not wanting to – or not knowing how to – recover the outstanding service fees via the terms and conditions of their contracts of sale.

“Most contracts allow for the developer to sell the apartment or villa in the event of non-payment and also recover all the legal costs and penalties.”

According to a recent survey by Dubai-based real estate broker Harbor Real Estate, the average annual service charges for buildings across Dubai are Dh16 per square foot.

“The highest service charges recorded were in and around Downtown Burj Dubai at about Dh22 per sq ft, while the lowest were in the Greens at Dh11 per sq ft,” said Harbor Managing Director, Mohanad Alwadiya.

“Consumers are no longer able to ignore the pinch of the economic downturn and investors and owner-occupiers alike are starting to evaluate very carefully the impact of service charges on the financial performance of their property and their own personal wealth.”

The survey, shared exclusively with Emirate Business, reveals that the overall average charge for villa communities is Dh2.5 per sq ft calculated on the overall plot size. Charges for villas are highest on The Palm Jumeirah, where the highest are between Dh4 and Dh5 per sq ft. “The lowest price is about Dh1.16 per sq ft for some of the villas in the Meadows community. This is broken down into Dh1.03 per sq ft for the general fund, Dh0.05 per sq ft for the capital reserve fund and Dh0.08 per sq ft for the master community levy,” said Alwadiya.

He said many developers who sold off-plan properties had not calculated the service charges at the time of sale, leaving many investors not knowing what the fees would be until the buildings were handed over.

“This makes it difficult for investors to determine the yield estimates on potential investments and adds a further element of uncertainty in an already uncertain environment. When buyers are considering purchasing properties, a unit that is complete with fees already apparent is more appealing than an off-plan transaction,” said Alwadiya.

“The majority of developers of projects that are still under construction do not provide service charge figures until the building is completed. On the other hand, most buyers and sellers, and even brokers, will not mention this important subject until the final stages of the negotiation process.”

Walid Jaafar, a partner at the Dubai-based Fichte & Co Legal Consultancy, said the official gazette announcement of Law No27 of 2007 on Ownership of Jointly Owned Properties in Dubai – the strata law – was published on December 31, 2007. Article 33 of the law says the legislation will come into effect within three months of the date of publication – ie on April 1, 2008.

“However, the law has still to be implemented,” said Jaafar. “The law does not address the issue of tenants. The law is intended to regularise the relationship between the owners of units in a specific development.

“This matter is usually left to the owner and the tenant to agree on. However, in practice, unless agreed otherwise between the parties in a tenancy agreement, the service fees should be covered by the owner.”

Fichte & Co has not yet seen any cases involving disputes over unpaid service fees, but does not exclude the possibility that a few are being reviewed by courts.

“In the absence of a regulatory law and the absence of any owners’ associations, the only possibility to file such cases lies in the hands of the master-developers or the sub-developers,” said Jaafar. “The claims in such a case would be based on the sale and purchase agreements and the master declarations attached to them.”

Quinn said that, once implemented, the strata law would create more transparency within owners’ associations. “If a building does not use all the budgeted funds in a year, the owners at the annual general assembly would have the right to decrease the next year’s budget or transfer the funds into the sinking fund,” he added.

The law makes it mandatory for every strata to have a 10-year sinking fund to ensure that money is set aside to pay for long-term capital expenditure.

“We at Essential Community automatically create a 20- or 25-year sinking fund to ensure all major plant and equipment are properly budgeted for on normal lifecycle cost structures.”

A strata general manager is appointed by the landlords of the building to create a draft budget, which is then reviewed by a board.

“After it has been approved by the board it is sent to all owners before the annual general assembly and is then approved there,” said Quinn. “After the meeting has approved all the agenda items it is then up to the strata general manager to enact all the motions and ensure they are carried out.”

Quinn said the most important duties of a strata manager are to oversee the facilities management companies to ensure they and their sub-contractors carry out the jobs they are contracted to do.

“There is a major conflict of interest if a strata management company has its own facilities management company,” he added.

Landlords will control what the owners’ association does and how it spends funds through the elected board.

“This means that the individual landlords will have some power in what the service fees will be and be able to rectify things. The enforcement of the strata law will make it possible to split buildings into multiple cost structures,” said Quinn.

“The first is the master cost structure, which would pay the master community service fees, buildings insurance, essential service costs, the managers’ fees, the facilities managers’ fees, district cooling charges, etc.

“The second cost structure would be the residential component of the building, so it would pay all the costs for the specifically residential component, for example lifts, foyers, gyms, pools and car parks. The third cost structure could be then the commercial portion of the building and cover all the commercial areas.”

Jaafar said: “When the owners have control of their buildings they will, through their board, review complaints of tenants and issues to ensure a good relationship is maintained.

“At present a tenant may have problems and issues with the building he is in, but the developer does not want to know about it or does not understand what they need to do to rectify them. There are some developers that are doing a good job in running their buildings, but everyone still has problems with conflicts of interest issues on maintenance items.”

Jaafar said according to Article 25 (2) of the strata law, if a unit owner fails to pay the service fees, the manager of the owner’s association would take action against the owner three months after notifying him through the notary public, enforceable by the execution judge in any competent court.

“However, the unit owner may object to this decision within the three-month period. In such a case, the execution shall be withheld until a decision in the subject of the objection has been reached.” Meanwhile, analysts called for the strata law to be enforced as soon as possible.

Nicole Betts, Senior Manager of Asteco Association Management, said that while Dubai awaited the regulations that supported the jointly-owned property law, Asteco had been working for several years with a number of high-profile clients well ahead of the implementation of the law.

“We have been helping companies establish informal owner associations, set up service charge and budgeting models, set community rules as well as facility management and service provider selection procedures based on best international practices,” she said.

“Some companies are actively encouraging owners to take control for themselves – albeit at this stage this has to be done under the developer’s name.

“A good example is the MAG Group which is dedicated to transparency. We have worked with them from conception of their MAG 214 Jumeirah Lakes Towers project through to delivering onsite management services to an informal owners’ association. Our team works closely with the owners’ management board to assist them to preserve, maintain and enhance the tower.”

Mohammed Nimer, Chief Executive Officer of MAG Group Property Development, said: “We have always operated in an environment of transparency, so it was natural for our company to introduce best practice in property management to enable owners to truly run their own buildings.”

Asteco has also been working with another developer for the V3 Tower, also located at Jumeirah Lakes, where handover to owners commenced recently.

“Our role is to administer day-to-day operations and assist in the formation of an informal owners’ association and a management board,” added Betts.

Article in Emirates Business 24-7

Long-term prospects for investors in the Burj Dubai tower are relatively solid if they have paid a fair price, with expected appreciation of 10 to 15 per cent per annum over the time, believe realty experts.

In a survey conducted by Emirates Business, Mike Atwell, Head of Middle East Operations, Cushman & Wakefield; Matthew Green, Associate Director, CB Richard Ellis (CBRE), Middle East; Adel Hamaizia, Sales and Marketing Director, RE/MAX Abu Dhabi, Mohanad Alwadiya, Managing Director, Harbor Real Estate; Chet Riley, Equity Research, Middle East, Nomura International, and Venkateshwaran Ramadoss, Senior Research Analyst, Real Estate Department, Kuwait Financial Centre, said iconic buildings are attractive to both investors and occupiers, but the building’s success depends on the supply and demand dynamics in the market.

Emaar Chairman Mohammed Alabbar has said Burj Dubai will open on January 4, 2010 to coincide with the four-year anniversary of accession to power by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.

Experts said returns on quality assets have always been there. However, investors have to take a long-term view on property and move away from the speculative model that has evolved in Dubai.

Is buying commercial or residential units in Burj Dubai a wise choice today since prices have bottomed out?

Atwell: Although the property market within Dubai has witnessed a significant price correction this year, we believe it is still too early to say whether prices have bottomed out. A degree of uncertainty remains in the market, caused by a number of factors including lack of available debt financing, potential over-supply and quantifying end-user demand.

Green: If we look in isolation at current prices over 2008 levels, then it certainly looks an attractive investment. However, we must remember that the market has changed significantly over the last 12 months and investors can no longer assume double-digit annual growth rates. During the period demand has weakened substantially, pushing vacancy rates higher and adding to the risk of unit voids. Investment decisions within the current market climate will thus vary, dependant on the overriding driver. Those looking for buy-to-let properties are likely to be more cautious considering weaker demand levels, while those looking at owner occupier assets are likely to be more bullish.

Hamaizia: Yes, as the saying goes “what goes up must come down”, and in this context vice-versa. Major cities of the world (mostly now mature) have all seen cycles of which crazy, semi or mini booms witnessed crazy prices that came down substantially. For example, half or less/50 per cent down –London in the early 90s, Singapore more recently… but subsequently observed a stable recovery, typically reaching at least 75-85 per cent of peak times.

Alwadiya: Investment recommendations are unique for each client and are directly linked to the structure of returns that an investor is seeking in a project. In reality, those clients who paid extremely high prices for Burj properties in 2008 will not enjoy initial healthy return on investment (RoI) per annum – as rental prices continue to drop as a result of the global economic crisis. Some may receive as little as two per cent return on investment in their first year or two. However, those investors who are instead seeking the benefits of long-term capital appreciation and are able to wait for 10 years, enduring lower RoI per annum, will be handsomely rewarded for their patience. I personally believe the price of the Burj will continue to grow at a promising rate over the next 10 years making it an extremely worthwhile investment over other projects.

We were against the investment in the Burj last year due to the rapid price escalation that was seen in the project in 2008 but we will definitely recommend investing currently to capitalise on the excellent prices that are currently on offer and the expected capital appreciation that will be generated as soon as the tower is launched.

Riley: The Burj Dubai is already, and will remain, an iconic building and the focal point for the downtown area. As such residential space should normally have additional intrinsic value and demand but we still believe any investment in real estate should be undertaken for the long term. The choice to buy (or lease) commercial space has to be made considering a number of different variables depending on use. For example, rental levels and potential yields, service charges, tenant demand and expected occupancy, which all ultimately drive capital values. We believe in the long-term prospects of Dubai considering the positioning and infrastructure spend to date. This gives the emirate a lead over regional counterparts, so we believe there will always be a long-term demand for high quality property.

Ramadoss: An analysis of Colliers International’s Q3 2009 foreign ownership house price index suggests prices for properties under construction in Downtown Burj Dubai increased by 15 per cent, while excluding this, the index contracts. This is essentially the premium assigned to the development approaching completion which got captured. While prices appeared to have bottomed out in general, these are not clear signals of a complete turnaround as prices could track down should there be a market- wide contraction. Hence, it would be appropriate to buy if the intention is to have a stable income potential or to bet on the extent of premium that is still left to be priced.

Do you believe the tower offers a good investment proposition for long-term inventors?

Atwell: The Burj Dubai is well located, being within close proximity of the existing and future key CBD areas – DIFC, Sheikh Zayed Road and Business Bay. It is also well serviced by other amenities, including surrounding hotels, Souk Al Bahar and Dubai Mall. The Burj Dubai is an iconic building and will be the tallest man-made structure ever built. It is in a prime location and forms the centrepiece of Downtown Dubai, a large-scale masterplan development that will include more than 30,000 residential units, Dubai Mall, nine hotels and commercial space. The building itself will contain 175-key Armani hotel plus Armani Apartments, an additional 700 apartments and office space, although how much remains unclear. Iconic buildings are attractive to both investors and occupiers. However, the building’s success will ultimately depend on the supply and demand dynamics in the market, pricing and the underlying property fundamentals. Other key factors will include the operational efficiency of the building, which is dependent on but not limited to the building management system, lifts, parking, accessibility, public transport and how the strata management company is run.

Green: Returns on quality assets are there to be had, but investors need to start taking a more long-term view on property and move away from the speculative model that has evolved in Dubai. When choosing an asset to invest in, it is important to select a product that has a genuine lasting prospect for returns. The Burj Dubai will offer a prestigious address within the world’s tallest tower, a superior product quality, world-class facilities, and, importantly, it should also be well managed. All these factors would suggest the long-term prospects for investors are relatively solid, assuming a fair price is paid.

Hamaizia: Prices of property situated in proximity to, or that are a part of any signature or world famous building tend to hold value (long term) or are semi-immune to economics or exogenous shocks… be it London, Paris, New York or Dubai for that matter (due to views, footfall/tourism, shopping or financial districts or interest in that structure from an arts or architectural perspective).

Alwadiya: The Burj Dubai tower has all the factors that will set it for success: Iconic design, excellent location, Exceptional finishes, First-rate facilities, Fantastic mix of assets. Any investment in a tower of this calibre is viable now and will continue to be well into the future.

Riley: Investors with long-term investment horizons have generally done well from property across most international markets, but as we have recently seen both residential and commercial property markets are subject to cycles, which can have some large swings. As the market becomes more established in Dubai, cycles should start to stretch longer and become less volatile. Previously speculative gains were driving the market, but we expect to see investment returns at much lower levels than those seen during the construction phase. One of the core tenets of property investment is its lower risk nature, but ultimately this equates to lower returns. Good quality property should deliver stable investment income with some capital appreciation, which is what long-term investors are generally looking for.

Ramadoss: Such towers often get a prestige value attached to them and would be a low-risk/low-return investment option as they tend to be pricey. The advantage is in its lower volatility as prices tend to contract at a smaller multiple relative to the market, as is the case with a typical ultra high-end developments. However, one needs to assess the extent of premium by comparing it with peer developments across the globe as in the current scenario, it could attract speculative interests as well.

What kind of appreciation can one expect in the long term, say five to 10 years?

Atwell: Capital growth is dependent on both rents and yields, which are in turn affected by numerous other factors. We cannot forecast anticipated appreciation over the long term. However, we would anticipate yields will sharpen from the double digit expected returns that we see today.

Green: If we consider the rapid change in Dubai over the last five years, then you can see the pitfalls of predicting the future in such an un-transparent environment. The Dubai market needs a period of stability so that investors can start to regain some of the confidence lost as a result of the downturn. Only after this is achieved can we really start to look for any level of price growth.

Hamaizia: As aforementioned, real estate history of the New Yorks, Singapores and Londons of this world, have always seen a stable recovery (back to at least 75-85 per cent of peak times within five years), when infrastructure, employment, investment and other city value-adding activities are taking place, supporting or present.

Alwadiya: The Burj is by far one of the best investments currently available for those investors who are able to wait for capital growth as opposed to initial return on investment per annum. It is likely that we will see a significant increase in the amount of unit trading following the tower launch in January. The Burj will continue to retain its value after its launch, and will increase its financial value/appreciate over time with an estimated rate of 10-15 per cent per annum. If you compare its price to the different towers around the world that once held the title of “the tallest”, you will see that they still today command an average price of over Dh10,000 per square foot. This is a far cry from what we are experiencing in today’s market where we are seeing the Burj command a price of less than half that amount.

Riley: We expect the level of capital appreciation to be relatively moderate in the short term. Over a five to 10 year horizon, we would normally expect moderate capital appreciation of perhaps five per cent per annum for this type of property, but this also depends on economic factors and conditions such as inflation. Generally speaking, Dubai’s residential and commercial properties are both linked to the economic cycle, perhaps more so than established markets, because the population base is more transitory. So this is a consideration for investors. Ultimately the ‘buy to let’ investor group will determine the market value so rents should establish the valuation floor.

Ramadoss: Longer-term price appreciation would tend to reflect the market level price appreciation. However, the price behaviour would be similar to the performance of a low beta stock comparedto the market average price change.

Article in Emirates Business 24/7

Some 61 per cent of property buyers in the UAE are dissatisfied with the services provided by real estate agents in the market, according to a new study.

The research was conducted across the UAE with a focus on Dubai by real estate broker firm Harbor Real Estate, which talked with 178 property owners over a four-month period in a series of face-to-face interviews.

The research revealed consumers who bought properties in the past two years remained dissatisfied with the performance of real estate agents. “It all boils down to the servicing style of real estate agents, which has not been up to the satisfaction levels of the property buyers in UAE,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

“Currently, it is still a buyer’s market and services from realty agents need to be of high quality,” he said.

Alwadiya said the Real Estate Regulatory Agency (Rera) had been proactive to ensure that real estate agents deliver quality service, but the real estate broker market continues to be immature.

The study said Harbor intended to serve as a barometre on service levels in the local real estate market.

“Participants evaluated property brokers according to knowledge and skills, ethics and behaviour, consultative ability, and empathy. The respondents were asked to rate their individual experiences on a five-point scale ranging from excellent to very poor. Of those interviewed, 61 per cent of respondents rated their brokers as either poor or very poor,” said the report.

Of those interviewed, 73 per cent had purchased their property prior to the recession – set as October 2008 – while the remainder had purchased their property after October 2008 (post-recession). About 23 per cent of those interviewed purchased within the last four months.

About 12 per cent of consumers who made their purchase prior to the recession stated that their experience was excellent or good.

In the post-recession period, that number fell to about 11 per cent, although satisfactory ratings improved from 25 per cent pre-recession to 31 per cent post-recession.

In the post-recession market, 58 per cent of respondents rated their experience as poor or very poor, bringing the two-year average of dissatisfied customers to 61 per cent. The buyers objected to the lack of agents’ knowledge, consultative ability and empathy.

Alwadiya said: “What we have here is an indicator of an industry which is still relatively immature. The level of proficiency in effective consultancy, based on sound knowledge of the market and an understanding of the buyer’s requirements, appears to be the main shortcoming. Buyers today have choice and are more knowledgeable about the market, and they seek advice from professionals that they feel they can trust. Unfortunately, in the majority of cases, consumers are left feeling disappointed.”

Harbor Real Estate is also monitoring its service-level performance against those of its affiliates.

“What we are seeing globally is a race for improvement. Realty has been under huge pressure due to the recession, and those who wish to thrive in the market will only do so by identifying and responding to the needs of clients,” it said.