Dubai: Dubai's property industry is now a buyer's market. It's a far cry from the heady days of the property boom when sellers were calling the shots and getting a premium price.
Buyers are now after the most attractive projects. There is a reasonable demand for residential units in areas that have finished roads and basic facilities, such as shops and schools, according to property agents and consultants.
While some properties in prime locations such as the Arabian Ranches, Emirates Living, the Palm, Downtown Burj Khalifa and Dubai Marina are selling better, it can still be challenging to complete a sale.
"The main hassle or challenge is to find a buyer in a market where there's a lot of competition," says Craig Plumb, head of research at Jones Lang LaSalle, Middle East and North Africa.
"The main issue is how to package your property to make it the one that people want to buy, and price is obviously part of that. But there's more to it than that." Steve Morgan, head of Cluttons UAE agrees. "I believe oversupply can be a challenging factor, which is why most sellers must carefully consider preparing their property for sale to make it stand out from all the others. This, and a competitive price, is very important."
Sellers must be realistic
Due to increased documentation and formalities, mortgaged properties could pose as a challenge for sellers, according to Shilpa Guruswamy, commercial and legal manager of Asteco Property Management. When it comes to prices, sellers have to be realistic, consultants say, but that depends on when the property was acquired. "In terms of an average, the prices are back to the level of [the] end of 2006 and the beginning of 2007 and, within that, it's going to vary," says Plumb.
"If you bought the average apartment at that price, you are probably back down to about the same price today," Plumb says.
"But if you bought any time during later 2007 and 2008, then you are going to be selling at a loss." The overall market has come down to 60 per cent from its peak, which would have been between June and September 2008. With buyers still driving prices down, the actual sale price depends on several factors, according to Morgan.
These include the motivation of the seller, how long the property has been on the market and whether the buyer needs finance or cash. And that could mean selling your property at a price lower than what you bought it for.
Properties are still being sold at a profit in areas such as Emirates Living and Palm Jumeirah, says Guruswamy. However, off-plan properties in areas such as Sports City and Jumeirah Village are slow moving. Buyers who invested during the peak period are finding it difficult to sell their properties at purchase price or above, she adds.
Plumb advises sellers to use a professional agent with a track record in this market for two reasons.
One is the amount of work required. You can sell the property privately, but it will involve a lot of running around. But the other reason for using an agent is that the seller traditionally gets a better price. "Evidence has tended to show that sales using an agent achieve a higher price than sales direct," Plumb says.
"If you are not so concerned about getting a top price, do it yourself. But if you want to get a higher price, and you are time constrained, my advice would be to use an agent."
A seller should take great care in selecting his agent, making sure that the company is registered with the Real Estate Regulatory Authority (Rera) and has a good reputation within the market, says Morgan.
"The seller should look to build a relationship with their agent and give them a timeframe with which to sell, so the exclusive agent will work in a manner that is commensurate to the seller's needs and interests which ultimately will lead to a successful sale," he adds.
For overseas investors wanting to sell their property, it's obvious to use a locally-based broker. Currency is another thing to consider.
Tax implications
"It's something that a lot of investors probably have not considered fully in the past unless they are a dollar-denominated [investor]," says Plumb.
"Obviously it doesn't matter if you are an American investor. But if you are a European or an Indian, obviously you could gain and lose more on the currency when negotiating with your buyer. Also, there's a tax implication in the home country once the property is sold."
Though Plumb puts the sales commission in Dubai's residential property market between five and eight per cent of the selling price, Asteco's Guruswamy said the rate ranges between one and three per cent. As to how soon a property can be sold, opinions vary.
"This [aspect] also does not have a finite timeframe, and will also depend on several factors, such as the availability of similar properties, price, condition/appearance, views, whether it is rented or vacant," says Morgan. "If the property is well priced and in good order, then it should find a buyer within four to eight weeks."
The entire process, from the time an agreement is signed between a seller and an agent and the completion of the sale, can take anywhere from a week to a year, says Ryan Mahoney, chief executive of Better Homes. "However, in general, it takes a number of months."
1. he vendor calls the agent and gives some information relating to the property, along with the submission of documents such as copy of the Title Deed/Sale and Purchase Agreement (SPA), floor plans and passport copies, in the case of an individual. If it is a company, related documents such as a valid trade licence, board resolution and passport copies of the authorised signatories are also required.
2. Any professional sales agent with years of experience in the local market will inspect the property to estimate its value. The factors that are considered for the property valuation are the completion of the community, infrastructure, floor and view, among others.
3. On the basis of the information provided and checked by the sales agent, the details are logged and the property is listed. Details can be viewed on the website of the agent. Sales agents start conducting viewings of the property and keep the vendor informed of any offers received. Once a prospective buyer has been found, both the parties proceed with the other formalities related to the sale.
4. The seller settles all payments, if any, due to the developer and other related parties, for example the Owner's Association, Palm District Cooling, Dewa.
5. The seller then receives a security deposit, normally ten per cent of the purchase price, from the buyer by way of a bank manager's cheque.
6. The deposit is a guarantee should the buyer pull out. The seller too has to pay the same penalty that is applicable to the buyer in the event of a default. This should be addressed in the memorandum of understanding (MoU) between the two parties.
The MoU needs to cover all aspects pertaining to the assignment. For example, before finalising the date of the transfer to complete the sale, potential delays in obtaining the necessary approvals, no objection certificates (NOCs), Dubai Land Department (DLD) appointments need to be taken into consideration, as do the payments related to service charges and DLD registration fees.
The security deposit from the buyer needs to be collected and held by the agent, or an escrow agent, which can be refunded or adjusted on the date of the transfer at the DLD. Mismanagement can delay or jeopardise the process.
7. All the related paperwork (MoU, submission of documents, signing of agreements and assignment forms, receipt of clearance certificates from the Owners Association) are signed and completed by both parties to enable the developer to process the NOC.
The parties obtain the NOC from the developer to transfer and register the property into the new owner's name at the land department. Both parties fix an appointment at the DLD to effect the transfer. On the scheduled transfer date, all parties, along with their respective agents, meet at the DLD office to carry out the transfer.
8. The seller then receives the balance of the agreed sale price, in the form of a bank manager's cheque, and the buyer receives the title deed in his or her name.
9. It takes around a month from the finalisation of a deal i.e. the signing of the MoU until the final registration of the property in the buyer's name. Charges for the legal work can vary according to the nature of documentation required and the method used.
For example, the attestation of documents may vary from a simple notarisation from Dubai Courts if the document is executed in Dubai, to a notarisation and an attestation from the UAE embassy at the place of origin followed by verification and attestation by the Ministry of Foreign Affairs at Dubai, if the document is executed outside Dubai.
Source: Asteco Property Management, UAE
Pressures
- 2006: year matching level of today's realty prices
- 60%: drop in market from September 2008 peak
