Agents insist property is still good business

DUBAI // Estate agents are warning property owners to be realistic about how much they can sell their homes for in the current climate, but say considerable profits can still be made. With the runaway growth of recent years at an end, property sellers are having to slash prices. But estate agents say profit margins are still much higher than in the US or European markets and that if sellers reinvest wisely into bargains they can continue to make money. Engel and Volkers, an international real estate agency, recently held a sale at its Marina franchise of 150 homes in some of the emirate's most exclusive addresses, including Emirates Hills, The Marina and the Palm Jumeirah. The properties had a combined Dh175 million (US$47.5m) knocked off their original listing prices. Although the company did not make any sales on the actual day of the event on Dec 13, it has since closed on six luxury properties worth just under Dh50m. Simon Walker, sales manager at Engel and Volkers's Marina office, said the company held the sale to lure investors back into the market and show sellers they need to be realistic about pricing. Many sellers who are lowering their prices have already seen a huge appreciation in the value of their homes and are not too troubled by the squeeze on their profit margins. Among the properties sold after the Engel and Volkers event was a penthouse at Jumeirah Beach Residence that was reduced to Dh14m from Dh21m, as well as two luxury villas on The Palm, which were priced at Dh13.5m and Dh13.7m respectively, compared to Dh24m each two months prior. The villas had originally been purchased for between Dh5m and Dh7m, meaning that the seller made a profit of more than 100 per cent, instead of the usual 300 per cent they had been achieving previously. Three other properties at Jumeirah Beach Residence and The Jewels sold for between Dh2.1m and Dh3.3m each. "With the amount of money spent on marketing, I expected to get about 80 people through the door so to achieve only 31 in total was disappointing," Mr Walker said. "But 31 people did jump in their cars to see what we were doing and actively approached the sale with a positive manner. This market needs proactive ideas to kick start the new year. "We have been getting our sales teams to educate sellers about prices. Sellers have to be realistic but if you consider that they are buying at Dh7m and selling at Dh13m, this is still a considerable profit. You are not going to get that kind of profit anywhere else in the world. "It is a very tough market. Nobody wants to make a loss on property. This is not what this is about. But we are still making 100 per cent profits. You are not going to get that margin in the US or in Europe." He suggested investors who sell their properties reinvest while there were so many bargains around. Vineet Kumar, head of sales and leasing for Asteco Dubai, said the recent price correction had been "meaningful for the market". Finished properties, he added, were going for about 15 to 25 per cent less than earlier in the year, while off-plan properties were being sold at their original prices. "Many people with finished properties have taken the decision to rent them out rather than sell, due to falling prices," he added. The fact that estate agents are advising investors to cut prices shows how much the property landscape has changed since the summer, when hundreds of investors queued at Abu Dhabi's Cityscape Exhibition in the hope of being able to put their names down for a property. Obtaining a mortgage has become another stumbling block for potential buyers as banks have tightened their lending criteria in the wake of the global credit crunch. kattwood@thenational.ae