This generation of buyers is quite particular about the locations they want to buy into and the prices they are willing to pay for a property. Isn't this how it was always supposed to be?
"Their numbers are still not on the higher side, but enough to give the market some sort of traction after what has been an extremely difficult year in 2009," says Ranjeet Chavan, director at SPF Realty. "To get more of such buyers, it's important that the market does not go through any wild swings — either up or down."
But why classify them as third generation buyers? More so as the local realty marketplace is still far from reaching maturity. "The classification is necessary as the short- to medium-term fortunes of the market rest with these investors," adds Chavan. "You had the first generation of buyers who rode the wave of the market, which opened up to foreign buyers. They got the maximum benefits from low entry prices and instant turnaround of these assets.
"Then there emerged the second generation who bought into property at values close to the peak or at the peak itself. These are the ones who are now stuck with liquidity issues and properties that are never going to be built. It's a sad state to be in, but it's the reality.
"Now, in the aftermath of the market correction, you have the third generation coming in. They are needed to take the market forward and they are on the lookout for projects more or less near completion."
In terms of location preferences, Dubai Marina will be an obvious beneficiary of attention from this investor class. The reason for the re-emergence of interest in this cluster is obvious.
Drop in prices
"At Dubai Marina, property values are averaging between Dh700 and Dh800 a square foot, which is exactly the range they should be in compared with the peak of Dh1,400," states Chavan. He reckons that for those buyers in Dubai Marina who prefer to place these properties in the rental market, there are still decent yields in store. As against the 12 to 13 per cent they commanded during the good times, now these would be around eight to nine per cent. "Still good enough compared with the available options," insists Chavan.
But with any upturn in buying interest for a particular location, chances are that values across the neighbourhood would rise proportionately. "We believe it will not be the case with Dubai Marina at this particular moment in time," says Chavan.
"The market is getting comfortable with the 2007 pricing levels available now. Within Dubai Marina, there are quite a few projects nearing completion in the next 12 months and could add anywhere up to 8,000 to 10,000 apartments. The Marina 101, Pinnacle and Princess projects are making good progress. The new supply will keep overall values in Dubai Marina honest... at least for the time being." For those prospective buyers willing to put up 20 to 30 per cent of the value as equity, there are mortgage lenders willing to take them seriously.
"Access to financing is not a serious issue, as it was through 2009," says Chavan. "In fact a couple of banks are aggressively pursuing prospects in locations such as Dubai Marina and Downtown Burj Khalifa because of the number of completed, or soon-to-be completed, projects."
Brokerage services
SPF Realty is back to doing what it does best — pure real estate brokerage services. During the heydays of the market boom, it had ventured into underwriting real estate deals and provided advisory to a Swiss bank looking to invest in local property.
"The present situation demands that we go back to our core competence, which is in brokerage," says Ranjeet Chavan. "We needed an expanded team and it is one reason why we kept hiring even as the market was headed down. It is paying off now."
