Distress sale of Dubai homes up

Dubai: Distress sale of residential property in Dubai's booming real estate sector is increasing as some owners face a cash crunch and some projects are delayed, an industry official said.

Heather Wipperman, chief executive of property investor Investment Boutique, said sales of properties at zero premium had risen in the past year but were mostly restricted to small luxury apartment portfolios and low-rise residential blocks.

Distressed sellers were generally expatriates or single investors owning low-rise apartment blocks, who were expecting to buy low and sell high but had mismanaged cash flows.

These investors were often short for their next payment and are seeking to recover their initial capital outlay or face possible repossession by developers.

"Not only has the volume [of distress sales] been increasing but I think the level of urgency has been increasing," Wipperman said. "It is difficult to give percentages of housing stock falling into low premiums [zero to two per cent], but the numbers are rising. A lot of people offering low premiums are also willing to negotiate down. You have people coming and saying zero per cent premium and I will absorb the transfer fees."

Investment Boutique is a sister company of Better Homes, UAE's biggest real estate agency, and manages a Dh75 million fund that seeks to invest in profitable short-term opportunities in UAE's real estate market. The fund targets annual returns of 20 per cent and was launched by investment bank Emirates Financial Services in April.

Wipperman said residential blocks on distress sale were mainly four to eight-floor middle income housing units owned by single investors with purchase prices ranging from Dh10 million to Dh40 million.

Their owners face a cash crunch because slower-than-expected infrastructure development has delayed sale of these projects.

A slowdown in take-up owing to inadequate retail financing in some instan-ces resulted in greater-than-anticipated cash demand on investors while some face a cash crunch owing to poor recent stock market performance.

Property prices in the UAE surged in 2003-04 after the government allowed foreigners to buy homes in 2002, enabling most investors to make hefty profits on re-sales at high premiums. But values are now beginning to reach a plateau and prices could fall further this year as about 60,000 new units are expected to hit the market by the year-end.

Still, residential rents are estimated to rise some 17 per cent on the average this year after jumping 30 per cent last year as a fast-growing economy attracts thousand of workers from other countries.

Demand for commercial real estate, retail space and villas, however, still remained strong.

Residential blocks on distress sale are mainly four to eight-floor middle income housing units owned by single investors with purchase prices ranging from Dh10 million to Dh40 million.

The government should make a survey of the rents people are paying and sue all landlords who are not considerate. We toil day in and out to keep Dubai's name high on the list over the world. Can the landlords give us a peaceful night's sleep by lowering the rents?
Pooja
Dubai,UAE

Dubai is a land of fortunes. We all know thousands of north Americans are still trying to move to Dubai because of the quaity of life with enough savings and many wish to invest here too, therefore the prices for villas and rents are bound to increase which seems normal.
Sana
Mississauga,Canada

Dubai is great value and will ever remain so. For those who dream of the bubble that doesn't exist, they are at the wrong bus stop- and for those, who beleive they have missed the bus, Dubai has many surprises that are yet to come. The best way to verify these is to go through GN Property Classifieds - what was selling for 600 in January is priced at 800.
Name withheld by request
Dubai,UAE

In Dubai the 15% law came as a relief for existing tenants. But for new tenants the lanlords are making contracts as per the market rate. I beleive that at the end of 2006 a new resolution is going to be passed. The government should make sure that all new contracts made in 2006 should not have their rent increased for at least the next two years as they are already paying a very high rent.
Sunny
Dubai,UAE

I have been feeling since 2005, there is something artificial about Dubai. People are trying to make it an international city within a very short span of time. All the great cities have taken considerable time to reach to the status that they are currently in now. Dubai is a beautiful city and it is growing very fast in natural course. I think the artificial inflation is unnecessary.
Sudip
Dubai,UAE

Rents in Dubai have gone up like anything. In spite of the government orders that landlords in Dubai can rise the rent only by 5% every year, the landlords do not follow this rule. They make the tenants vacate and raise the rent by an additional 10-15% each year which is unfair. Due to this problem, it has now come to a situation where the rent in one year is higher than the annual salary of some people and they are forced to send their families back home. Dubai has a promising future and I hope the Government intervenes and strict action is taken.
Karthik
Boston,USA

There are a lot of options one has within the real estate market of Dubai. An intelligent investor/end user will identify projects for which demand will continue to rise.
Kashif
Lahore,Pakistan

Always have some chairman or CEO from real estate company said on TV or newspaper that "property price in Dubai still very cheap compare with London or New York". How many years history for London real estate market and how many years for Dubai's?
Liu
Dubai,UAE

It's about time. All analysts have been predicting a correction. Especially after the painfull equity market correction seen in 2006. I for one expect a steep correction in the real estate market.
Arif
Dubai,UAE

I was in Dubai recently. I noted one thing during my short stay in the city. It's a vibrant city with a promising future. I was considering investment opportunities in the real estate sector. I tried to do some research on the demographics. I realised that the population of the city is not much when you compare it to cities like London or Paris. But the number of advertisements for apartments/villas available for sale in the supplements of daily newspapers far exceeeds the advertisements we see in newspapers in London/Paris. The Demand and Supply ratio seems to be skewed and that to very much towards the wrong side (supply far exceeding the demand).
Fernon
Paris,France

Dubai needs to see a property correction. Rents are untenable and buying is on par with London. The thing is Dubai is new and needs to stay financially attractive for the young, vibrant and educated people if it wishes to create a world class city. Therefore this can only be a good thing otherwise the cons will shortly outweight the pros of living in Dubai for many people.
James
Dubai,UAE

Rent in the UAE, particularly in Dubai have gone up like anything. People are forced to sacrifice all their pleasure and comfort and opt for shared accommodation. There should be a market price correction. Forcing families to send wives and children home is painful. But many do it as there is no other way.
Santhosh
Dubai,UAE

They should impose new laws in order to keep the uncontrolled rise of rental and properties prices down. Owners and speculants are taking advantage of the situation. If prices keep rising, then Dubai will be an empty place with a lot of nice buildings!! Companies will not be able to keep a level of good working force if the rise of prices in Dubai continues! I hope things stabilise over here.
Fernando
Dubai,UAE

I have seen a lots of flats laying vacant for months in Ghusais, Dubai Sharja border. But the real estate people are sticking to the higher rent. Hopefully they won't be able to hold it for long and be forced to rent it out at a lower price in the near future.
Jis
Dubai,UAE

Now that small investors (those who are not backed by large funds) are falling into cash crunches because nobody wants to buy their properties. When are the medium/big ones going to start feeling the pinch? If nobody buys your property it's because people don't have the money to pay for it, or it is simply too expensive for what you are offering. I believe Dubai falls into the latter category and that shows a problem with the supply of housing being offered. Are people who invested in smaller properties going to be hit even harder than the first ones? If this happens I really think we will be facing a market crash since there will be no-one left to buy what the developers are offering now.
Guillermo
Dubai,UAE

The article is misleading as smaller projects in less prominent locations may be faced with such a situation. More established projects like JBR, Palm, Marina (Emaar buildings) are still getting good premiums.
Riyaz
Dubai,UAE

If prices are rising like before, it means people won't be able to stay here for a long time. The cost of rent per year here, is more than annual salaries.
Mubeen
Dubai,Indai

I would be hesitant to buy anything in Dubai. It's a bubble that many expect to burst. I hope not, but I have my reservations.
Ivan
Manama,Bahrain

As an individual investor in single units I aprreciate Heather Wipperman's guidance. Normal people like me are not aware of these situations. Now I can go for a better bargain. If we had somebody like him to advise in the stock market situation we would not have lost there. Thanks to the sincere reporting of Gulf News.
Jolly
Dubai,UAE

This article fails to point out that some projects in Dubai are selling at negative premiums in the re-sale market and Buyers/Investors are struggling to come up with their next payment.
SB
Abu Dhabi,UAE