New property attracts new brokers

Robert Ditcham

• Last Updated: July 18. 2008 12:48AM UAE / July 17. 2008 8:48PM GMT

Paul Preston, Abu Dhabi Sales Manager for Sherwoods Independent Property Consultants speaks to a client on the phone at the Abu Dhabi office. Sherwoods, Independent Property Consultants is one of the leading property sales, consulting and brokerage companies in the United Arab Emirates. Ryan Carter / The National

While crumbling housing markets spread doom and gloom among US and UK estate agents, their peers in Abu Dhabi could not be more optimistic. Agents are thriving on a healthy supply of new property, and for the first time in decades Abu Dhabi is building plenty of it. Brokerages which have largely neglected Abu Dhabi’s property market in favour of Dubai are urgently extending their presence in the capital as its US$6.5 billion (Dh23.9bn) construction sector gathers momentum.

Spending a day with sales agents at the Abu Dhabi branch of Sherwoods Independent Property Consultants in Sheikh Khalifa Street, The National witnessed first-hand the urgency with which investors are seeking a foothold in the capital’s property market.

At first all is quiet. Then Sherwoods sent an SMS alert to a database of its customers, informing them that 10 floors of Soho Commercial Tower on Reem Island will be sold before its official launch, and within minutes the office sprang into life.

Sales agents were bombarded with calls from prospective buyers asking for details of the project completion date, the reputation of the developer, the payment plan and, most importantly, the expected rate of appreciation.

Sherwoods was selling each floor for Dh28.5 million upwards but investors had their eyes firmly on the price per square foot, which at Dh2,595 was competitive.

“It’s very near to residential prices, which is unusual,” said Paul Preston, the Abu Dhabi sales manager at Sherwoods. “Normally you’d be looking at about Dh3,000 per square foot.”

Within an hour investors had snapped up four of the 10 floors with down payments of Dh2.85m or more per floor. Most buyers intended to divide an entire floor into six to eight offices, wait for about three months – until just before the next payment due date – and resell the offices at a higher price per square-foot.

“Investors need breathing space where they can buy, have a period of growth and resell before the next instalment is due,” Mr Preston said.

Exact appreciation rates are impossible to predict, but some buyers have earned premiums of more than Dh20m in six months. Agents are confident that Abu Dhabi will mirror Dubai, where some commercial units were “flipped” on the resale market up to 30 times before construction was finished. Once properties are completed, investors can expect rental returns of up to eight or nine per cent.

Prices in Abu Dhabi have already grown 53 per cent this fiscal year compared to 18 per cent during the previous 12 months, according to Colliers International, property agency.

“We can’t guarantee investors that they won’t lose money,” said Mr Preston, “but nobody has yet.”

A colleague of Mr Preston warned that investors regard Abu Dhabi as a homogeneous market at their peril. “There are a lot of very smart investors out there who understand that every development has its own micro-economy,” he said. “What sounds like a good deal for one development might not be so for somewhere else.”

But the only real dark cloud is the rental sector. Although the severe shortage of properties means high prices – and thus higher commissions for agents – the sector is facing lean times. Many leasing agents are leaving the business because, with no product to offer clients, they cannot earn a living.

Mr Preston said Sherwoods had restricted its Abu Dhabi operation to sales.

“There’s almost nowhere to lease in Abu Dhabi,” he said, adding that he was feeling the pain directly, paying Dh150,000 a year for his one-bedroom apartment near the office. “When there’s a bigger rental market, we’ll definitely play a part in it, but for the next year there isn’t going to be,” he said.

In the meantime, Sherwoods plans to double its staff of sales agents in the next two months.

Despite the strength of the sales market and the attractive appreciation rates it offers, property in Abu Dhabi does not sell itself, Mr Preston insisted.

“It’s a competitive market and we have to go that extra mile to build strong relationships. The clients aren’t driven by price so much. They want a service.”

But how far does a sales agent go to provide this service? With investors spread throughout the world, and across several time zones, the pursuit of a sales commission could easily dominate an agent’s whole life.

Mr Preston, who maintains a relationship with about eight major customers, both locally and overseas, said he switches off his work mobile at the end of the working day. But if an important client is preparing a substantial bid, he knows he must lead by example.

“We’re not a 24-hour service and we’re encouraged to switch off outside working hours, but there’s no way I wouldn’t meet an important client,” he said.

Mr Preston, who has been buying and selling property for himself for many years in Spain, the US and UK, is a newcomer to the property profession. He was a golf pro at the Abu Dhabi Golf & Equestrian Club before joining Sherwoods and has adapted his prowess on the course as a sales tool.

“I’ll take them golfing for a day and build a really good relationship – then we’ll sit down for a meal afterwards and talk about property,” he said.

“This weekend I’m playing golf with a big investor from London and on Saturday I’m working from ten until seven on a project launch, so I’m doing more hours than I should be,” he said. “There’s a lot happening and I don’t want to miss out on it.”

A good relationship between agent and client can be richly rewarding for both parties. A single investor often uses the same agent to broker both the initial purchase and the unit’s resale on the secondary market, resulting in two sets of commissions – at a typical level of two per cent. For the initial off-plan sale, the project developer pays the commission; for resales, the secondary buyer pays.

“We think beyond the first sale,” Mr Preston said. “We want people who buy or sell through us to be our clients for the next ten years.”

Estate agents must also allay fears that some foreign investors hold over the long-term outlook for Abu Dhabi’s property market. The planned introduction of escrow accounts to protect buyers’ payments, and rumours that the emirate’s laws on foreign ownership will be relaxed, are helping to boost confidence among individual buyers and institutional investors, agents say.

However, one of the main challenges when dealing with new clients is to break the barrier of distrust that surrounds the property brokerage profession, says Mr Preston.

Numerous horror stories of unprofessionalism and greed among maverick agents have tarnished the industry’s reputation and spurred the Abu Dhabi Chamber of Commerce and Industry to announce plans to regulate it.

Agents will be obliged to undergo training and sign a code of conduct before being registered as licensed brokers.

“We do all we can to get rid of the stigma that can be attached to the property market, but it does take a lot to gain people’s trust,” Mr Preston said.



rditcham@thenational.ae