Text size:

  • Small
  • Normal
  • Large
Property investors attending a property forum last week in Abu Dhabi, above, voiced their concerns about stalled projects.
Property investors attending a property forum last week in Abu Dhabi, above, voiced their concerns about stalled projects.
Ryan Carter
Property investors attending a property forum last week in Abu Dhabi, above, voiced their concerns about stalled projects.

Lost property office

The delay of several Abu Dhabi projects has investors worried about legal options and the state of the market, Personal Finance reports from a forum designed to address these issues.

The best word to describe Dandan Liu's state of mind at a property forum held in Abu Dhabi last weekend is "nervous". Ms Liu, 44, a Canadian estate agent who works in Dubai, was looking for some sort of assurance about her personal investments in the Abu Dhabi market. After moving to Dubai from Canada two years ago, she began adding to her property portfolio by investing in a number of Abu Dhabi projects, including residential developments by Hydra, Sorouh and Tameer.

While she prefers not to discuss her level of investment, Ms Liu says she has handed large sums of money over to the developers - and the fact that the projects are still far from finished has dented her confidence in the capital's property market. "In some cases developers are demanding payment of 40 to 50 per cent, but they're still doing basement-level work at the projects," she says. "I'm attending this forum for my clients and for myself. I want to know what's happening to these projects, namely, when or if they are going to be developed."

Ms Liu says she wanted to find out if Abu Dhabi had a lands department, and if escrow accounts had been set up to protect investments. "There are many things I want to ask, like if the Abu Dhabi Government will regulate developers," she said. "I'm sure I'm not the only investor with these concerns." She wasn't. Of the 80 people who attended last Saturday's forum - organised by LLJ Property, an Abu Dhabi-based company specialising in property sales, leasing and management services - at least half of them wanted to know what the Government was doing to help secure their investments.

Representatives from LLJ Property, the international law firm Clyde & Co, as well as Abu Dhabi Finance and the estate-agent website Propertyfinder formed a panel to answer questions. Linda Loughnane, the managing director of LLJ Property, says the purpose of the seminar was to dispel some of the myths circulating about the state of Abu Dhabi's property market. One of the biggest misconceptions, she says, is that demand would decline as new projects are completed.

"This is just not the case," Ms Loughnane says. "There are many, many new businesses opening in Abu Dhabi not connected to the construction industry. Suggestions there would be a mass exodus over summer have just not been the case. There are still queues at the supermarket, and it's still difficult to get your child into the school of your choice." She cited the developments of Marina Square on Reem Island and Al Raha Gardens, near Abu Dhabi International Airport, as examples of recovering prices, and said that while 7,000 new units are expected to come to market in coming months, it will take much longer for supply to meet growing demand.

Properties at Marina Square - which has an expected move-in date of the second quarter of 2010 - were listed at around Dh1,900 per square foot at the beginning of the year. That price fell to below Dh1,000 per square foot by the summer, and the properties are now listed at between Dh1,300 and Dh1,350 a square foot. At Al Raha Gardens, which opened in 2007, rents soared at the beginning of 2008. Four-bedroom villas were leasing for up to Dh400,000 per year before falling to Dh200,000. Now, Ms Loughnane says they are back up to the mid-200,000s.

"There is the idea out there that many projects have been cancelled or stalled and nothing really is going ahead, which in Abu Dhabi is not the case," Ms Loughnane says. "But investors are asking for some sort of protection and transparency. They want reassurance if they've paid money to know the development is going ahead." Another question raised by many attendees was if there would be any relief from soaring rents.

Samer Younes, a human resources officer with a large energy company in the capital, says high rents have made finding housing for new employees difficult. Originally from Lebanon, Mr Younes, 44, is a relative newcomer to the scene, having moved to Abu Dhabi nine months ago. "It's a major problem here finding any kind of adequate accommodation at reasonable rates," he says. "Things should ease as new projects come online, but I think rents will only slightly decrease. There are a lot of new expats coming to the city. It's a race between extra supply coming online and more demand as the population increases. I don't have specific questions; I'm just here to listen and to gather ideas."

At present, one-bedroom units in Abu Dhabi's central business district are renting for about Dh140,000 a year, while two-bedroom units are priced at Dh175,000. One attendee told the crowd: "I don't know what I want. I have several investment properties, and as an investor I want the rates to stay up, but as a renter I want them to come down. I guess what I really want is to see things stabilise, but I am hearing so many stories I don't know what to think."

Fortunately, a new set of property laws before the Abu Dhabi Executive Council - due out soon - should help ease investor concern. The proposed legislation is expected to include a strata law giving property owners control over communal areas of a development, as well as an escrow law to monitor the use of investor payments by the developer. Also expected is a mortgage law regulating banks and financial providers in the event of payment defaults and foreclosures; and a clarification of the permits needed by developers prior to launching sales on a project.

The laws would also create a regulatory body that would monitor the UAE capital's property market. The body, similar to Dubai's Real Estate Regulation Authority, would oversee transactions carried out between developers, investors, end users and property associations. These regulations eventually could require developers to align their payment system with construction milestones - as opposed to the current practice of demanding investors to make payments on a set schedule, regardless of construction progress.

Moustafa Said, a senior property lawyer with Clyde & Co who lives and works in Abu Dhabi, says the laws should go a long way to addressing many issues raised by attendees at the forum. "The laws are expected imminently," Mr Said says. "We can't say with certainty when, but once they're introduced they're likely to go a long way to giving investors the confidence they need." However, while the new laws may boost investor confidence, Ms Loughnane says they cannot guarantee complete safety.

"Ultimately, people need to take some responsibility for their investments," she says. She explains that people who bought into the market at its peak, with a borrowed deposit and no way of knowing where their second payment was coming from, are likely facing financial trouble. And investors who went into the market without following careful due diligence, so they could understand the companies they were dealing with, may also wish they had been more careful.

"My advice for potential investors is to look at who you're buying from, and their track record," Ms Loughnane says. "And if you're buying, be sure you get a clear definition of what you're buying. If you're buying 1,200 square feet make sure the 1,200 square feet is the internal area and doesn't include car park space or outside corridors." Using conveyance solicitors who are dedicated to liaising with developers and mortgage providers should also help the contract process, Ms Loughnane adds.

Ms Liu says the forum has eased her concerns, at least for now. "This opportunity was good to give investors peace of mind and assurances, but really, everyone's waiting to see what happens next," she says. "It's encouraging that some laws will be in place to protect investors, but I think we have to wait and see how far they go and whether they cover both new and existing projects. I still believe Abu Dhabi is a great market - it has the potential to be the best in the world - but I will be waiting to see what the new laws are before I make any further investments."

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

 The cooling towers of the Temelin nuclear power plant near the Tyn nad Vltavou in Czech Republic. The country wants to continue expanding nuclear energy capacity despite cancelling a tender to build two new units. David W Cerny / Reuters

In pictures: Best business images for the week to April 17, 2014

Here are some of the best business images for the week to April 17, 2014.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 The rush of new supply of hotel rooms pushed Dubai occupancy rates down to 87 per cent. Sarah Dea / The National

Dubai hotel room rates rise 10 per cent

The rush of new supply pushed occupancy rates down to 87 per cent, a dip of 2.6 per cent from the previous year. Winter months are the strongest for Dubai hotels, with occupancy and prices falling to half their peaks by July.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National