Abu Dhabi property developers are looking to the third quarter of the year as a possible turning point for sales of new homes after more than a year of depressed activity. Aldar Properties, the largest developer in the capital, is planning to release as many as 150 apartments on to the market to take advantage of a wave of completed buildings around the city. The company believes potential buyers may be more willing to purchase property once new buildings are available to view, rather than buying off-plan.
Between 10,000 and 20,000 homes should be added to the market by the end of the year, including several hundred homes in Aldar's Raha Beach buildings, according to recent property reports from consultancies. "We strongly believe that when people will be able to touch and feel the units, there will be a whole different factor in sales," Shafqat Malik, the chief financial officer of Aldar, said yesterday. "A finished building is very different from the off-plan sales and construction sites."
Aldar has not focused on sales of homes for more than a year after demand for homes that had not yet been built fell away when prices began declining. The company had a few land sales, but its executives focused their efforts on completing projects and re-evaluating plans rather than marketing and sales. Mr Malik said Aldar would not drop prices to "distressed" levels. "We do not believe we should go into any distressed scenario at all," he said. "We do have the resources to hold on to those units as well [as rentals]."
Chet Riley, an analyst at Nomura Securities, said that a sales push would be a welcome test for the market but that the developer would have difficulty without attractive financing offerings. "There are as many problems in Abu Dhabi [as elsewhere] because people aren't lending, whether its to sub-developers, developers or end users. Without lending, you are not going to get any of these transactions through."
Abu Dhabi Finance, a mortgage company partly owned by Aldar, has emerged as a major tool of the Abu Dhabi Government, which is a part-owner of Aldar, to stimulate the property sector. Armed with funds borrowed from the Department of Finance, the company began in March to offer the country's lowest mortgage interest rate, 5.75 per cent. Still, its offerings cover only selected buildings, restricting the impact of the cheaper mortgages.
Sorouh Real Estate has since been able to lower interest rates for new buyers at its Sun and Sky Towers on Reem Island to 4.99 per cent, which has led to as many as 500 inquiries, according to Gurjit Singh, the company's chief operating officer. Sorouh released 40 units on to the market in March but has yet to announce sales. "In the last 18 months, we have been focusing mainly on how our current purchasers remain with us through repricing and restructuring," Mr Singh said on March 7. "Now we want to put some units back into the system. We want it to be a catalyst in the market for potential purchasers."
Those units may have been offered with a cheaper mortgage but at prices of between Dh1,450 (US$394.76) and Dh1,650 per square foot they were considerably more expensive than the average market rate of about Dh1,200 to Dh1,300 on Reem Island. Mr Riley said some buyers were willing to pay a premium for cheap financing but it would still limit the demand for homes. firstname.lastname@example.org