Tenants Benefit from Oversupply of Real Estate in UAE

Dubai’s construction boom that lasted over six years has definitely come to an end, and although work has resumed somewhat in the construction sector, almost everyone agrees that the pace will never again match the glory days of the past.

Indeed, many projects were left abandoned as it became common knowledge that the downturn was evident. Expatriates left Dubai in droves, leaving behind unpaid bills and their cars at the airport. As work has resumed, it has become evident that it is better to recover the costs sunk in the unfinished projects than leave them uncompleted. At least cost and profit margins would both be recovered on the sale or rental of these project units to their owners, renters or investors. Owing to the euphoria of the past, deliveries of residential units will be about 20,000 more than the demand in 2010. The ultimate result would be a further fall in the prices of these units. Some signs of this are already evident, as rents in the northern emirates have dropped considerably since 2009, in the face of fresh supply and low demand.

Even the rental rates have dropped by around 30 percent. This trend is likely to continue into the first half of 2010, due to fundamentally weak demand in the face of a huge supply from within the northern emirates and the border areas of Dubai- among them Muhaisanah, Al Ghusais and Al Nahda.

The demand is low, almost non-existent in the market, although the rental market is seeing some movement, mainly from tenants seeking better quality property. The maximum decline in rentals was observed in the case of single bedroom apartments, which dropped 34 percent, while double and triple bedroom apartments dropped 29 percent and 25 percent respectively. This drop may be largely due to people opting for larger flats with lower rent on offer in comparison to previous months.

Meanwhile, the emirates of Ajman and Ras Al Khaimah also saw a drop in values by 50 percent or more for off-plan properties. Gaps between rental rates however remain the same among various northern emirates. Sharjah continued to demand the highest rentals, followed by Ras Al Khaimah, Ajman, Fujairah and finally Umm Al Quwain, the most affordable northern emirate. Work on projects in Ras Al Khaimah has been moving quickly, compared to those in Sharjah and Ajman which are progressing very slowly.

With more residents choosing to move to the border areas of Dubai, where there is better quality stock and competitive rental rates, the leasing rates across the northern emirates continue to decline in 2010.

A high percent of residential accommodation is offered by the northern emirates, which has stemmed from growth and development in Dubai. But this in turn has caused higher expectations for new units.

To prevent any loss of tenants, landlords in the northern emirates have been offering sweeteners like rent-free periods of one to two months, free parking spaces, free chiller and other such incentives.

Avenues of Growth in Dubai Property in Current Situation

Reason behind the expansion in Dubai property sector is the changes in laws and provision of flexibility for foreign investors provided by the government, which permits foreigners to buy, rent and sell properties in Dubai. Many real estate development organizations are offering resident visa for those who buy real estate from them. Several multinational organizations are currently establishing their offices in Dubai, which made Dubai a first-rate work market for professionals and skilled workers around the globe. More professionals are fascinated towards Dubai for the reason that the city provides attractive high salary. This phenomenon has created enormous demand for accommodation and office spaces. Especially Dubai apartments are very famous among the young and lively professionals and villas in Dubai are the hot choice of relatively affluent class. Laws in Dubai related to property are very understandable and formalities are minimum as compared to other countries.
With the continuous and rapid surge in Dubai’s population, a substantial proportion of which consists of expats and temporary residents living in Dubai for employment reasons, the question of buying or renting a residential property in Dubai is the talk of the day. Both the potential tenants and home buyers may be troubled by the question. But still reports on Dubai real estate say that the changing picture of global financial markets shouldn’t deter the locals from buying Dubai property if their plan is to stay there over the couple of years. As for those who plan to stay in Dubai for more than five years, buying a property can prove to be the wisest decision they ever made given the prices of Dubai property climbing higher and higher with each passing year.

How to Negotiate a Real Estate Contract

If you are out for hunting a house for days and you’ve completed your research and now ready to make an offer to buy the house of your beautiful imaginations. At this stage don’t get impulsive, wait and think how much you want to offer the seller?
Prior to do anything else you have to to know what a sensible market cost is for the house you expect to buy. Ask your real estate agent to have a Comparative market analysis for you on the same category of homes that were sold in the last year in your aimed locality. Though an evaluator will only use the data of last six months of sales when making appraisal value, it is useful to get an overall trend analysis of the neighborhood to evaluate that prices are increasing and that investment will be safe in the long run.

To come on a reasonable price you and your agent should compare the location, amenities and condition, location of similar houses that are already sold out the current market competition of other similar property for sale in the area.

You also need to figure out what are expecting to pay for the particular house. If you want to pay existing market value because you don’t want to lose the property then let your agent know this in advance. Most of the agents try and bargain a below market sales value for you because they want to satisfy you and keep you as a prospect client. Only a buyer determine how he may feel if he lose the home to the other buyer for a little difference in price. If you want to buy your desired property than tell your real estate agent this so he can negotiate for you a better deal.

Real estate set for reforms

Dubai: Last year started off with a bang in Dubai's real estate sector, with sky high sale prices and rents, and a series of attention-grabbing projects in the pipeline.
There was a massive 42 per cent increase in house prices between the last quarter of 2007 and the first quarter of 2008.
Additionally, high rents triggered many people to buy property rather than spend on renting, according to Sadallah Abed, property analyst at Colliers International.
The market was a property playground swarming with speculators and investors who wanted a piece of Dubai real estate action.
But as the global financial crisis hit property sectors worldwide and undermined confidence in the banking sector, a few reports published in early summer predicted a downturn in the Dubai real estate market as well. For example, a Morgan Stanley report forecasting a then-unlikely 10 per cent drop in property prices by 2010 triggered deep discussion among industry experts.
By the end of the year, concerns about the UAE property market were growing, particularly following announcements of job cuts and projects being put on hold.
The global credit crisis further complicated the situation as major home finance companies and banks restricted lending. Less mortgages mean less buying and, unfortunately, higher rents.
"With the lack of mortgage facilities, demand for rentals is actually going up, not down," Nicholas Maclean, managing director of CB Richard Ellis, said earlier.
Developers like Omniyat Properties and Damac are now rethinking payment plans in light of cash-strapped banks and other mortgage lenders.
Dubai's Real Estate Regulatory Authority (Rera) have continued to tighten and implement further regulations in an attempt to highlight the importance of transparency.
The end of December saw the creation of a compulsory online registration site for tenancy contracts, as Rera prepares to finalise the rental index some time in 2009.
The index will help to create zoned areas within Dubai, each zone having an average rental rate.
However, some residents in Dubai have questioned Rera's effectiveness, with dishonest developers still wheeling and dealing in the market and rental rates still high. They argue rents can only be set by market conditions, not by Rera.
The good news is that all of this combined should spell the end of the dreaded one-cheque policy, Marwan Bin Galita, chief executive of the Real Estate Regulatory Authority (Rera) said.
"This is what I'm strongly trying to introduce. People should have the choice, to pay monthly, or quarterly or in six months," Bin Galita said.
But it is hoped that by mid-2009, because of these regulations and genuine efforts to stabilise the economy, the current financial situation will cast no more shadows and Dubai's property industry will be stronger and more successful in the long-term.
Though the last three or four months have been decidedly grim, most analysts believe 2009 will be the year of the end-user, with liquidity awash in UAE banks and mortgage-lending institutions and property prices coming down to reasonable levels.

Source: Gulf News

Dubai House Prices to Grow Higher in Autumn

Article Source: www.ameinfo.com

The summer slowdown in the booming Gulf States is of course nothing like it used to be in the old days. Then you could pack your bags and head to Europe in late May and return in mid-September and not have missed a thing.

Now business activity continues over the summer, with most expatriates on contracts that only allow for a month of holiday, and a good deal of planning work gets done over the summer. In the real estate business too, people do buy and sell property over the hot months.

But there is a point when rushing around with documents in almost 50C temperatures does become rather wearing for all but the most dedicated, and the big decision makers tend to be absent. The argument for waiting until cooler weather returns then looks very attractive.

Sleepy summer

The result is therefore that the real estate market cools down over the summer months and then tends to burst back into life in the autumn. More buyers mean that prices tend to go higher, after a few 'distressed sales' over the summer months, and sellers who can wait for this moment generally do just that.

In the heat of the summer there are always a few sellers whose patience or finances run out and for the real bargain spotter this can be a good time. Indeed, flipping on properties bought in the summer into the buoyant autumn season is a clever trade.

Why should it be any different in the summer of 2008? There are some concerns that the Dubai property market is overheating, although new project launches are sharply down on a year ago and the new escrow account system is working well.

The cancellation of one project on the Palm Jebel Ali by Damac Properties has caused some ripples in the local market. But pessimists about Dubai real estate are always with us, and have been proven wrong so far.

Autumn price spike

Surely this autumn the prospects for renewed interest in local real estate, and another autumn price spike are better than ever. Local interest rates are falling, and with high inflation there are negative real interest rates in Dubai. That means the local economy is effectively paying real estate investors to buy property.

Meanwhile, the supply of property 'particularly in the affordable category' is well below demand from the constant flow of new expatriates into the booming emirate. And on the basis of international comparisons Dubai real estate remains cheap, albeit with prices now rising sharply.

With the local and global stock markets delivering negative returns for investors this year, and deposit accounts paying miserable interest rates, Dubai property stands out as one of the few asset classes with upside potential, and money usually flows to where it will achieve the best returns.

Article Source: www.ameinfo.com

Real Estate Markets

Lots of methods are there ways for strengthening the real estate markets, including “hot” versus “flat” or “growing” versus “declining” or “buyer’s” versus “seller’s.” All real estate markets are subjected to greater fluctuations; but classically all those fluctuations do not authority the capability for the informed investor for attaining a profit. In fact, some strategies, such as flipping real estate, can be the least risky way for a beginning shareholder for making a profit in a indistinguishable market because of the moderately short amount of time the flipper will own the property. Unlike the stock and possessions markets, real estate markets will not be raising or falling quickly. Additional market factors are imperative to your buying decision for long-term investing. Investors who have considered for short-term real estate market appreciation are always wondering at, which is outside of the basic model of low-risk investing.