Friday, October 29, 2010

Dubai property prices yet to hit bottom: Prince Alwaleed

Dubai's depressed property prices will take several more years to bottom out, before recovering, as the market still remains over-supplied, predicted Saudi billionaire, Prince Alwaleed bin Talal.

Alwaleed said that there are several new buildings coming out in Dubai, and the market is yet to hit bottom, and there are years to go before this could happen, as there is constant increase in supply.

Alwaleed, the nephew of King of Saudi Arabia, King Abdullah, mentioned this when speaking during an interview with Arabian Business online magazine.

The prices have to go down considerably for the demand to reach on par with supply, said Prine Alwaleed, who is also the world's 19th richest man with a fortune of 19.4bn dollars, as ranked by Forbes.

Several landowners are holding on to their old prices. Only when the prices go down substantially, there will be increased demand, he added.

Ever-since Dubai was hit by the global financial crisis, the prices of housing in Dubai have dropped by 50% from their peak in 2008. The Dubai Real Estate Authority has already said that about 480 construction projects which were in their budding stages, have been cancelled to tighten the noose on supply.

However, several developers are left with no option, but to continue working on their ongoing projects, thus adding more units to the already saturated market.

The five year property boom in Dubai was mostly contributed by speculators, who were drawn by the attractive profits made through sale of off-plan properties. These investors vanished when the crisis hit the emirate, with many writing off their initial investments.

Wednesday, October 27, 2010

Dubai surplus properties will take 3 to 5 years for clearance

The surplus residential properties in Dubai will take three to five years to clear, says the Nakheel Chief Executive, Chris O'Donnel, when speaking about the Dubai real estate market.

The general oversupply seen in the real estate market will be cleared, driven by economic growth, he said.

House prices in Dubai have fallen by 60percent from its peak in 2008, largely owing to oversupply situation. The house prices are unlikely to recover before 2011, while the oversupply situation in commercial properties is likely to grow by more than 50 percent next year, said Jones Lang LaSalle, the leading property consultancy.

There is plenty of work, to the extent of Dh.7bn to Dh.8bn to be completed here. But these projects will be completed, said Chris O'Donnel.

Meanwhile, an Analysts poll by Reuters predicts a GDP growth of 2.4 percent this year for the UAE.

Tuesday, October 26, 2010

Property Sale deed can be terminated in case of difference in specs

The legal experts in Dubai have clarified that a purchaser can approach a competent court to seek termination of the sale contract, in case of any material difference is found between specifications mentioned in the sale contract and the actual specifications delivered.

A Partner and Head of Real Estate Middle East for Norton Rose group, Nick Clayson, said that the law does offer protection to purchasers, in case the measurements and/or specifications of a property differ from that mentioned in actual purchase agreement. But, the remedies provided, depends on the degree of deviation.

A Partner at Afridi & Angell, Shahram Safai, said that general the specifications are so different that the purchaser would not have even received the benefit of his/her bargain.

Decree 6 of 2010 stipulates that a purchaser can even seek termination of a purchase contract, in case the specifications are considerably changed, he pointed out.

According to the current rule, in case the measurement of a property is found to be more than five percent less than the measurement of the property specified in sales and purchase agreement (SPA), the developer is obliged to compensate the purchaser.

A well-drafted contract should specify the rights and remedies of the parties in the event of any discrepancies in such issues. But, even the contract tend to be fairly varied in the region, when it comes to such issued, and do not match international measuring standards, Clayson said.

However, the best thing that a purchaser can do, is to ensure that he obtains a well-drafted contract with intentions of the parties clearly set out and retain copies of all correspondence with developer in respect of the property, he said.

Clayson further pointed out that obtaining a snagging report on completion of the property can also assist the purchaser in the event of any subsequent claims against the developer.

Meanwhile, Safai said that a report by quantity surveyor or professional engineer commissioned to make such an assessment may be required to prove difference in specifications in such issues, although snagging reports may prove as helpful supporting documents.

Friday, October 22, 2010

Dubai's property sector continue to witness low rents

The impact of Dubai's real estate crash has been so strong on the rental rates within the emirate, that even an address at the iconic Burj Khalifa, is not immune from this.

About 825 of the tower’s 900 ultra-luxury apartments are still vacant, following its grand launch last year, said Better Homes, a real estate brokerage firm in Dubai.

At present, the cost of renting a studio with marble fixtures and wooden floors has dropped to $1,815 per month from $3,025, while a single bedroom is available to rent at $2,722 ($4,536 earlier), the brokerage firm said.

An owner of a double bedroom residence at Burj, who spoke to the media, said that he had purchased the property for about $1.5mn in 2005. The value had jumped to about $762 per sq.ft., during the peak period. But now, the values are just above his purchase price. However, he is confident that the price will pick up faster here than any properties in other localities, given, its iconic location.

Burj Khalifa, with its one-of-a-kind amenities, including the first-ever Armani Hotel, is the most high-profile example of the once booming real estate market in Dubai.

On the whole, the property prices in Dubai have dropped by an average of 50 percent. Few half-built projects located away from the main highway that runs through the city, may never be completed, as their values have dropped too much, according to analysts.

Meanwhile, the units that are to be completed are also a problem. The Dubai economy needs to still accommodate a series of housing units coming on stream, or soon to be opened, which will further bring down the prices.

In the month of September alone, there was an entry of 27,000 new residential units in the market, with another 9000 to be completed by end of the year, reports Jones Lang LaSalle.

For the year 2011, the Company predicts that about 30,000 new units will come on-stream. The surplus in commercial properties have compelled landlords to offer incentives such as free rent, and allowances, to finish out shell construction space.

Dubai's RERA recently agreed that it is in the process of canceling half of all the projects registered with the authority. Out of 980 developments, 495 are on the chopping block, said the Dubai sovereign-bond prospectus.

However, the good thing is that people are no longer willing to purchase off-plan properties. Rather, the savvy investors or institutions are actually moving in, aiming distressed or re-priced assets, says Paul Devonshire, Director, Pramerica Real Estate Investors, specializing in the MENA region.

Wednesday, October 20, 2010

Abu Dhabi property market to see more consolidations in 2011

The real estate market in Abu Dhabi is all set for another consolidation in 2011, with huge supply of high-end homes in the next 15 months, which will do little to meet the shortage of mid-income housing, said a real estate executive yesterday.

The Abu Dhabi developers will continue to complete and handover projects next year, while about 8000 high-end homes are likely to further enter the market towards end of next year, revealed Gurjit Singh, the Chief Operating Officer, Sorouh Real Estate.

Speaking during the Reuters Middle East Investment Summit in Dubai, he further said that the undersupply situation is focused on Abu Dhabi, and is predominantly the mid-income segment, and the gat needs to be filed. He, however, agreed that the government in Abu Dhabi is promoting more middle income rental housing projects.

Being the second largest developer in Abu Dhabi, Sorouh, is one among several other developers in the emirate to focus on developing government-backed housing projects, targeting Emirati families.

Singh pointed out that the government is more involved in making provision for Emirati housing, and this should continue, as there is need for such type of housing.

The developers across the UAE have been through the global economic crisis, which ended a six-year real estate boom, with Dubai suffering the most, while Abu Dhabi which is supported by the oil-revenue in the country, has managed to fare better.

Monday, October 18, 2010

UAE to adhere to current sponsorship system

The current UAE sponsorship system will remain unaltered, as the country is spending about Dh.50bn per annum to host 4 million foreign workers, said the Minister of Labour, Saqr Gobash Saeed Gobash.

He added that he has not seen a country that did not have a sponsorship system for foreign workers. He revealed that the government is open to improving systems and changing policies to boost local economy.

He said that the Ministry of Labour has been improving the sponsorship system and will continue to do so, whenever it sees benefits from modifying the rules.

The average cost of hosting a worker is estimated to be about Dh.55,000. The cost of a skilled worker is Dh.144,000 while that of an unskilled worker is Dh.33,000, said Dr. Mouawiya Al Awad, Director of Institute for Social and Economic Research, Zayed University. The overall average annual administrative and recruitment costs per worker, are worth Dh.2,674. Total wages and cash and non-cash benefits are an average of Dh.41,000 per worker annually.

But, despite the costs, hiring of foreign workers is an economic advantage over private companies, and to the UAE economy, in comparison to the productivity levels of the workers, the study revealed. The study found that return on investment on foreign labourers is five times more than making the hiring of foreign workers a more attractive option.

Saturday, October 16, 2010

Dubai Silicon Authority grants freehold status to Cedre Villas

The Dubai Silicon Oasis (DSO) Authority has the right to grant freehold status to real estate projects being developed within the free zone, a senior official has revealed.

The Senior VP Engineering Management, Muammar Al Katheeri, at the Dubai Silicon Oasis Authority, said that the DSO has the right to regulate based on its operational requirement and to decide on the areas that are to be granted as freehold.

As of now, the Cedre Villas will be granted freehold status, Al Katheeri said.

Earlier during the year, Regulation No.1 of 2010 which amends the Regulation No.3 of 2006, designated areas for expatriates to enjoy as freehold, and this was published in Dubai government official gazette. The 2006 regulation had designated DSO as an area in which foreigners could own property, but restricted the ownership rights to leasehold interests only.

The 2010 regulation removed this limitation and enabled the property within DSO to be owned by foreigners on freehold basis.

Al Katheeri said that granting of free zone status for projects depends on the management, as to how they see the future, and what they consider as best suited for operation as free zone.

The lease and sale of all 368 units in the first phase of the Dh.1.55bn Cedre Villas project has been completed, while the second phase was delivered in June. Nearly 40 percent of the units have already been leased and sold.

Al Katheeri revealed that during the launch of the project a 10 percent discount was given, which is now reduced to 8 percent. But, on the opening of the community centre, this will be further reduced to five percent or no discounts at all, as the project has witnessed good sales from the day of launch.

Tuesday, October 12, 2010

Affordable developments in Dubai gain strong foothold

The selling prices in several freehold communities across Dubai remained stable during the third quarter, in comparison to previous months, as per the latest report by Asteco, the property management company.

The third quarter report by Asteco Dubai, says that although further price adjustments are likely in the near future, affordable developments such as Discovery Gardens and Jumeirah Lake Towers (JLT) were priced at Dh.500 and Dh.750 per square foot respectively.

The report explained that Asteco has recorded an average drop of 6 percent for apartments. This is largely due to rapid increase in availability of apartments. But, there has also been an increased sale with owners who are likely to take handover of their units, but are unable to make the final payment, which constitutes large percentage of overall sales price.

This trend was also reflected in Downtown Burj Dubai, which, despite being at the opposite end of the price range, still commanded Dh.1,300 per square foot.

Although demand for townhouses and smaller villas is gathering pace, Asteco expects this to continue only in short-to-medium term. During the third quarter, properties in Jumeirah Island, Emirates Hills and the Green Community remained unchanged in terms of prices at Dh.1600, Dh.950 and Dh.700 per square foot respectively.

According to Elaine Jones, CEO of Asteco Property Management, there has been a change in focus in the real estate sector, as maximizing rental yields and long-term capital appreciation, has gained priority over short-term sale profits, with pro--ctive property management being a key factor.

The rental market in Dubai is favouring tenants. Despite an overall rental correction of 6 percent for apartments, the units in JLT dropped 2 percent, with 3 percent adjustments in Discovery Gardens and Downtown Burj Dubai.

The transaction numbers are usually at their lowest during summer and Ramadan. But, this time, it has been surprisingly active with several people taking advantage of the quiet months seeking value for money accommodation. Therefore, the drop in rentals is less significant during second quarter, the report explained.

Meanwhile, villa rentals have been slightly better, with average decline of 4percent from second quarter, following increased stock entry into the market in out-of-town developments.

Friday, October 08, 2010

Cityscape Global formally unveiled in Dubai

The Cityscape Global real estate exhibition was formally unveiled by H.H. Shaikh Maktoum Bin Mohammad Bin Rashid Al Maktoum, the Deputy Ruler of Dubai, at 10am today.

The Cityscape Global exhibition this year will showcase properties from the Saudi Arabia, Egypt, UAE, and Jordan, amongst other places.

This edition of Cityscape brings with it improved overall confidence in Dubai, as the conglomerate Dubai World had announced last month about having secured approval from 99percent of its creditors for a debt restructuring plan.

Moreover, last week, the Dubai Government placed a $1.25bn dual-tranche bond, which was oversubscribed four times, indicating strong investor interest in the emirate.

Following formal opening on Monday, Shaikh Maktoum, made rounds of the exhibition, which will run till Thursday at the Dubai International Convention and Exhibition Center. He stopped at several stalls to look at the displays and speak to exhibitors.

This year's Cityscape Global involves participation of more than 200 exhibitors, including developers and service providers.

Monday, October 04, 2010

Nakheel makes Dh.3.4bn payments to creditors; resumes work on a third project

The leading real estate developer, Nakheel, on Thursday confirmed that it has paid out Dh.3.4bn in cash to creditors till date, and announced the appointment of a consultant to assess claims.

Nakheel also confirmed that it has resumed work on a third project, namely the Emirates Cluster, located in International City, following Al Furjan and The Garden View Villas.

Nakheel has begun paying out trade creditors the money owed to them, Dh.500,000 or less in March, and confirmed that it has initiated payments worth Dh.4bn to its other creditors on 30th June. This leaves Dh.600mn as outstanding.

Nakheel is also working closely with other trade creditors to achieve its 95 percent acceptance of all payables and claims by end of the year, a Nakheel spokesperson said.

This acceptance is required by the developer to issue the sukuk to pay creditors remaining 60 percent of outstanding, which it hasn’t paid in cash.

The issuance of sukuk, is a part of the restructuring plan of the Nakheel, is widely believed to happen before year-end.

Completion of short-term projects is another mission related to the re-structuring plan. Last week, the developer began construction on Al Furjan Villas and apartments, and The Garden View Villas.