Friday, September 22, 2006

South Korean developers enter in Dubai property market

By the year-end, the total commitments from the South Koreans will be valued at over $2 billion. While the first lot of ventures is being financed solely by the developers, those that will follow could be backed by South Korean real estate investment trusts (REIT) and even European financial institutions.

“Our investment in Dubai is not a result of a detour, it is part of Korea’s own economic expansion programme,” says Lee Elliot, Manager at Bando Construction Co. Ltd.

The company is getting ready for a full-fledged presence in the local market with the Ubora Towers. Ground breaking is expected by the end of the year. Construction of the super-structure should commence in the first quarter of 2007. Sales of units (70 commercial and the rest residential and retail) have not started, but the prices should be comparable to the premium rates in Business Bay of over Dh1,000 a suare foot.

Located between the stadium in Dubai Sports City on the left and the Victory Heights villas on the right, the property will get a further push with its proximity to the Ernie Els 18-hole golf course. The high-rise offers 30 floors of commercial space at rates of Dh850 to Dh950 a square foot. Axon Gulf expects a sell-out by the end of the month.

In the pipeline are six other projects in Business Bay and Dubai Sports City. “It is location, the developer and his target market that will drive the property growth in Dubai,” says June S. Kim, Chief Executive Officer, Axon Gulf. On the possible entry of South Korean REITS, Richard Lee, Vice-President at Sungwon Corp., says: “It is their prerogative to direct investments into the Dubai market.” Apart from being the developer, Sungwon intends to use its vast construction track record to good use here.

[Article from Property Weekly]

Friday, September 15, 2006

Luxury home demand and supply mismatch feared

Serious concerns have emerged over a "mis-match" in supply and demand for top-tier Dubai property.

A potential lack of investors able to finance mortgage payments of approximately Dh18,000 a month for up-coming luxury properties in Dubai could create an over-supply in the higher-tier market, property market insiders say.

On the other hand, quality developers are continuing to overlook the provision of properties aimed at mid- income earners, they say.

"There seems to be a lot of property which is coming on line in the next two years in the high end of the market, where prices average Dh900 per square feet. In the waterfront area alone you will not find anything less than Dh1,000 per square foot," said Khalid Nazir, head of investment banking at Abu Dhabi Islamic Bank.

Nazir said if demographic predictions are to be believed, these prices will be out of reach for most UAE residents, creating a mis-match between supply and demand in the high-end real estate sector.

"When you work out a 25-year mortgage on an average flat in this sector, the payments would be around Dh18,000 a month. There are many international and regional investors who would be able to pay that sort of money, but will all the supply be taken by them I doubt it," he said.

However, at the other end of the property spectrum, Nazir said the supply of mid- to low-tier housing will fail to meet demand in two years when the UAE develops its manufacturing and boosts employment.

Speaking to delegates at yesterday's opening day of the Real Estate Investment World Middle East conference, Khalid Al Mashaan, chairman and managing director of Alagarn International Real Estate Company in Kuwait, said the GCC's mid-income housing sector is being overlooked by "professional" developers.

"There is a big market out there for property aimed at mid-income families, but not enough attention is being paid to it," he said.

"At this stage, what we are seeing is local players in the market, and local players are providing the same model over and over again without looking at the needs of the market."

[Gulf News - September 19, 2006]

Wednesday, September 13, 2006

Amlak plans Saudi foray by year-end

Amlak Finance aims to begin operations in Saudi Arabia and Egypt by the end of the year, its chief executive said. The Dubai-based Islamic mortgage firm says the opportunities in these virgin markets are exciting for a firm such as Amlak, which aims to follow parent firm, Emaar Properties, where opportunities exist.

Emaar, which owns 45 per cent of Amlak, is developing the $26.6 billion (Dh97bn) King Abdullah Economic City on the Red Sea, the largest private sector initiative in the Kingdom."The opportunity in Saudi is just colossal," Mohammed Ali Al Hashimi said. Emaar also has several projects in Egypt. The underdeveloped Egyptian property market, where mortgages have only been available since 2004, presents further opportunities, he said. "Remember, Amlak developed in Dubai, which is tiny compared to the size of these markets." Dubai has a population of little more than one million; Egypt's population is around 75 million, while Saudi has around 25 million.

Al Hashimi said the company, like rival mortgage house Tamweel, is also hoping to receive a licence to become an Islamic bank from the central bank, but has received no word on its application. Financial results are expected to continue to be strong; he said third-quarter results would be "good".

Amlak in July reported a first-half net profit of Dh80 million, up 60 per cent on the same period last year. Second-quarter profit reached Dh42.9m, compared with Dh30.5m in the same period of 2005 and Dh37.1m in the first quarter of this year.

Monday, September 11, 2006

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Sunday, September 10, 2006

Emaar Economic City to triple its Red Sea project

Saudi property developer Emaar Economic City plans to triple the area of its $26.7 billion (Dh97.9bn) real estate project on the Red Sea coast, the company said yesterday. The property developer’s shares closed at Dh33.50, up 9.84 per cent, the largest gainer on the Saudi Tadawul index.

A meeting of the board will be held on Tuesday to discuss the expansion at King Abdullah Economic City, a statement on the website of the Saudi stock exchange said.

The area under development will increase to 168 million sq m, the statement said, describing the project expansion as an increase of “around four times its current size”.

The project area was 55 million sq m, according to information previously released by Emaar Economic City. The reason for the discrepancy was not clear.

“The company has had all the required official approvals to expand the area of the project to neighbouring land,” the statement said.

King Abdullah Economic City is the single largest private investment ever made in the world’s top oil exporter. Dubai’s Emaar Properties, the largest listed Arab property developer, is a major shareholder in Emaar Economic City, which is spearheading the project.

Shares in Emaar Economic City, debuted on the Saudi bourse on Saturday and closed at more than three times its listing price.

Emaar City sold shares at 10 riyals (Dh9.7) each in a $680 million (Dh2.4bn) initial public offering in August that was 182 per cent oversubscribed. The $680 million (Dh2.4bn) IPO, the kingdom’s largest this year, was closely watched around the Gulf as the first major test of investor appetite after the crash of the stock markets between February to May.

Monday, September 04, 2006

Ajman cap rent increase by 20% in three years

Ajman residents have cautiously welcomed a recent decision to cap rent increases at 20 per cent every three years, but feel more is needed to ensure protection from exploitation. “Even if the government imposes a three-year ceiling on rent increases, the real estate agents can easily manipulate things,” said Yasmin, a housewife.

“They can ask the tenants to vacate, saying the property is sold to another agent. After tenants vacate, they can lease the same building for a higher rent. The cap would not affect such transactions.” She added that even before completing agreement periods, some tenants were evicted from their homes.

A good aspect of the new law, according to residents, is that no increase in rent shall go into force for first-time contracts that went into effect in the period from 1 January 2006 up to the date of issue of this decree.

Yasmin, like many other residents, felt that Ajman’s recent rent boom was fuelled by unnecessary speculation and artificial inflation from middlemen. Another resident, who did not wish to be named, said: “The agents create artificial shortages in the market. I know some vacant buildings in Ajman because there are no takers.The agents wait and then reduce the rent.” Another resident added: “If the building owners directly lease the building to the tenants without involving middlemen, the tenants would benefit. There are many agents, sub-agents and freelance brokers who make a quick buck from such deals.” “There was a time when the landlords would offer one month rent free as an incentive to attract tenants,” he added.

KB Devaraan, Financial Controller at HNS Group, claimed: “A number of real estate agents have come up in Ajman and now, in addition to paying high rent, customers have to bribe the clerk and other staff in the real estate company.They take people for a ride by demanding bribes.” According to him, the rent ceiling rules or other government regulations have not helped the average tenant.

“Some of these rules are just on paper. When affected tenants go to the municipality with complaints about arbitrary rent increase, they don’t get much help,” he claimed. Ajman has seen a rental boom in the past year as rising rents in Dubai and Sharjah pushed families out in search of other alternatives.

As Ajman’s hitherto-undeveloped property heats up, residents want more transparency and regulation of its market. The cost of renting has already seen the biggest jump in Ajman, with one-bedroom flats now going for Dh19,000, which is a 57 per cent increase.

[Article from Emirates Today on October 1, 2006]