Off-plan resale prices fall, say agents

Property prices in Dubai and Abu Dhabi have fallen for the first time on the secondary market as speculators struggle to meet instalment plans, while buyers have disappeared for lack of financing. Off-plan properties that are still under construction have been hardest hit by the downturn, which has emerged only in the past week, but sales of all types of property have slowed to a near standstill as uncertainty grows over the health of the global economy.

"It has been going on for a week now. I have seen prices going down about 10 per cent everywhere, even in Dubai Marina and Downtown Burj Dubai," said Khaled Elqassim, the sales manager at AAA, a Dubai-based property broker. "Pretty much all the secondary market is trading at less than it was before the financial crisis," said Karen Lay, the marketing manager at LLJ Properties in Abu Dhabi. The selling pressure is strongest from speculators who secured finance only for one or two instalments, sometimes through personal loans, hoping to sell at a profit. These sellers are now marking down their offers to find buyers, who in turn face difficulty securing loans. Home finance providers have tightened lending criteria and now offer only about 65 per cent of sale value, compared with 90 per cent just two months ago.

"If they can't afford the next payment and can't sell the property they invested in, they might find themselves in trouble," said Walter Hart, the managing director of Humberts International, a broker who recently entered the market. Many property professionals had expected prices to rise substantially after Cityscape Dubai, the world's largest real estate investment and development event, at the beginning of the month, but instead many agents' telephones have gone unusually quiet.

"Nobody is interested in off-plan any more. Our phones are quiet most of the time. We haven't felt the Cityscape effect," Mr Elqassim said. Another sales agent said: "Usually we sell around 120 units a month, but we haven't reached a dozen in October yet. I can tell you that nobody is selling here at the moment. We have been seeing an increase in the number of sellers and a sharp drop in the number of buyers."

Some owners who have met difficulties in paying their instalments to developers have asked for a postponement or rescheduling, property executives said. "I have even seen many of them already submitting forfeitures," said a legal adviser at AAA Lords. He added that some developers were becoming more lenient with buyers as sales had dropped to half the usual levels. Developers offering properties for the first time directly to investors had not yet reduced their prices, because they were not under the same pressure as retail investors, brokers added.

"Some people on the resale market are reducing their margins because they want to sell. But I haven't seen any reduced prices from developers," said Mohammed Guidoum, the chief executive of Remax, an Abu Dhabi-based broker. "People who cannot afford to pay the second or third payment, they need to sell. But people who are comfortable with their future payments or have a mortgage, they are not concerned."

Fran Wheatley, a broker with Landmark Properties in Dubai, said prices were falling in many different areas including Downtown Burj Dubai, plus some projects in Dubailand and Al Furjan. Munther al Bakri, a broker at Gravity Real Estate in Abu Dhabi, said prices in two Manazel developments were falling. "People are reducing their premiums. In Building Material City in Abu Dhabi, people who were making 15 to 16 per cent premiums are now getting nine per cent."

In its Al Reef development in Abu Dhabi, a two-bedroom villa that sold last month for Dh2 million (US$544,000) was now for sale at Dh1.75m, he said. Most property owners are still looking at a big profit, depending on when they bought. But for those who have just bought into the market, the outlook is far from certain. "We are seeing people selling at the original price, just to get out of the market," an agent from Hamptons said.

Selling pressure was greatest in the off-plan market, while completed properties were somewhat protected, agents said. Demand is greater in this segment because new residents are still demanding rental accommodation or buying property to live in to escape high rents. Rents have increased 22 per cent in Dubai, and 64 per cent in Abu Dhabi in the past 12 months. "Dubai is an attractive place to come and live in, more than ever before. People who are coming here for new opportunities all need to live somewhere," said Vincent Easton, the head of sales at Sherwoods.

Some brokers tried to put a positive spin on the price drops, predicting that they might recover soon. Andrew Covill, the head of sales at Abu Dhabi-based LLJ Properties, said: "some people are not really informed of the situation and think they need to sell. Now is not a time to sell, it's a time to invest for the future. There are fantastic deals out there. There is more choice for the buyers." ngillet@thenational.ae