Quality comes into play as recovery looks up

While there is no denying that living near the water is an attractive proposition, that in itself is not enough. Those time-honoured maxims of quality and even affordability come into play when judging a property.

“Unfortunately, there is a broad range of quality levels between the various developments,” says Linda Mahoney, CEO of Better Homes. “The real victims of the crisis will be those developers who scrimped on quality in order to save some money during the boom.”

In her opinion, buyers who were waiting for prices on waterfront properties to fall are now taking advantage. But their sphere of interest is limited to select properties built by premier developers. As a consequence, those units which are deemed to be iffy on the quality of build aspect are suffering. “The secondary developers who were only out for a quick profit have only themselves to blame,” says Mahoney. Be it Dubai Marina, Jumeirah Islands or Palm Jumeirah, it is the same situation and one cannot just go by a developer’s name.

“For instance, Nakheel used several contractors for Palm Jumeirah. Some properties are of excellent built quality, while others are not,” says the senior manager at Investment Boutique, Safina Rangooni Lakdawala.

Wear and tear
To compound matters, some of the premium residences have not received the after-care they should have. “Some developers haven’t looked after their asset after completion and they are now showing signs of wear and tear,” says Linda. “The Palm is a perfect example: the swimming pools, common areas, and so on are not being cleaned and painted.”

The lack of proper maintenance is irking residents. “How much are they willing to pay on top of what they must pay to the developer?” Linda asks.
Will this lead to a spiral of eroding values and returns on waterfront properties? “People now differentiate between buildings, for example if one is not as well serviced as the other it represents a lower investment yield and is not so attractive,” says Elaine Jones, Asteco’s CEO.

She makes a further valid point by noting that everyone loves a sea view and beaches and, in the local context, an Emirati’s heart is closely linked to sea by heritage. “The Palm enjoys the advantage that you can only build so many properties on there, so it will maintain an air of exclusivity.” It also seems to be the only area where location tops the quality parameter, while in Dubai Marina, buyers are only willing to pay a higher price for perceived quality developments.

Villas on the Palm’s frond seem to have stabilised, as advertised rates start at Dh8 million and are well over Dh20 million for the larger ones. Launch prices were around Dh4.65 million.

Cluttons’ Ronald Hinchey remarks that whether prices are on the up is not the priority today. The market needs to see the transactions take place to regain confidence. Indeed, he believes a price rise now would not be favourable. “It would deter transactions,” Hinchey says categorically. “It is liquidity that will change things. It is all about movement.”

Even a neglected property can still be sold, though buyers will demand a reduction in the asking rate to make allowance for the expenses they incur personally on the renovations.

However, one could say that waterfront properties have been more resistant to price falls. And where there have been declines, they are now staging a recovery. The Jumeirah Islands’ lake environment has served its prices well, but it should
be duly noted that values at The Springs have recovered equally well, albeit for different reasons.

There’s competition for luxury property investors out there, too. Take Al Barari, an exclusive ‘jungle’ with water features that evoke a Zen living experience. At starting prices of Dh20 million, these pose a challenge to the Palm signature villas.

In a soft market, investors are known to prefer to play it safe. That could mean the end-users and high-end investors feel more comfortable investing in areas such as Dubai Marina, which in the medium- to long-term represents less risk.

In summation, quality could surpass location as the only differentiator that a property investor should take note of.

Dropping Values
Prices have fallen from their peak for water-related properties:
Jumeirah Lakes Towers fell 46 per cent
Dubai Marina fell 40 per cent
Palm Jumeirah fell 57 per cent