Homeowners are trying to sell at significantly discounted prices to offload their properties amid a stuttering market.
Home sellers offering major discounts
ABU DHABI // Homeowners are trying to sell at significantly discounted prices to offload their properties amid a stuttering market. Posing as a prospective buyer of a two-bedroom apartment in Dubai and Abu Dhabi, our reporter was immediately able to knock about 10 per cent off several advertised prices. A two-bedroom apartment advertised at the Palm Jumeirah's Shoreline Apartments for Dh2.55 million (US$69,000) was reduced to Dh2.3m - a 9.8 per cent reduction - without any serious bartering. A similarly sized Dh2.3m apartment in Marina Quays, Dubai Marina, was cut to Dh2.1m with the minimum of fuss.
One broker selling a Dh2.6m apartment at Jumeirah Beach Residence refused to offer more than a Dh200,000 discount as he said the price had already been slashed by more than Dh1m since the summer. The sampling reveals the extent to which homeowners, many of them speculators who had bought off-plan several years ago with no intention of occupying their homes, want to pass on their purchase in case prices sink further and before their next payment is due.
House prices in Dubai fell by an average of eight per cent between October and December last year, according to a report released yesterday by the property consultancy Colliers International. Brokers said many speculators made huge profits in 2008 - prices climbed 59 per cent in the year - and wanted to bail out before conditions worsened. "People are begging for you to give them any contribution," said Dr Mohamed Guidoum, the chief executive of the Abu Dhabi-based estate agency Re/Max Absolute Realty, an affiliate of Re/Max International.
"They are either speculators who have made large profits and want to sell because prices are still going down, or are end-users who can't afford it now because their jobs are under threat or other factors." Dr Guidoum said sellers were now offering to pay brokers' commissions and transfer fees to sweeten the deal, a reversal of common payment practice. British buyers, who constitute a large percentage of home owners in Dubai, were especially keen to offload their property and benefit from the current favourable exchange rate, property analysts said. A Dh2m flat was worth just over £371,000 yesterday, compared to about £285,000 last summer.
According to the Dubai-based property services company Asteco, a buyer with Dh2.5m available to spend could now pick up a three-bedroom medium-quality apartment in Jumeirah Lake Towers. However, villas still remain out of reach at that price. Meanwhile, in Abu Dhabi, brokers were offering discounts of up to 15 per cent off advertised prices. A two-bedroom apartment for sale in Al Muneera district of Al Raha Beach was rapidly brought down to Dh2m from Dh2.37m.
"We think prices [in Abu Dhabi] will go down a bit more before they go up so it will soon be a good time to buy," said an Abu Dhabi-based broker, who asked not to be named as she was not authorised by her company to speak to the media. "You can even offer the original purchase price and get the deal. Some of those who bought the property to flip are willing to make a loss on what they paid because the next payment is coming up and they don't have funds to pay it."
At the heart of the property slump is a significant tightening of access to home loans, putting property ownership out of reach for all but the top earners. The end-user buyer who requires a mortgage to pay the full value of a property was once able to put down a 10 per cent deposit and finance the remainder. Now he must pay at least a quarter of the value and meet certain tight criteria before qualifying for a mortgage. The British bank Lloyds TSB will only finance villas at a loan to value ratio of 50 per cent.
Dr Guidoum said even executives earning monthly salaries of Dh60,000 would struggle to meet mortgage payments at property prices witnessed in recent months. However, Asteco believes the mortgage market will improve in 2009. The amount of money available to lend will increase thanks to government intervention and the expected merger of lenders Amlak and Tamweel into a centrally controlled bank, it said.
In addition, developers will ease their payment plans, while banks will realise that mortgages represent "an excellent and safe use for their available funds". In its forecast for 2009, Asteco said sales activity would increase as lending conditions relaxed. Developers in Dubai and Abu Dhabi are also expected to shift their attention away from building luxury homes to the affordable housing sector, of which supply is severely lacking.