Property prices have been falling in the UAE and are likely to bottom out at the end of the year, according to the consultant and estate agent Cluttons. So how do buyers best take advantage of a depressed market? Here are seven tips to keep in mind from the experts.
Do your homework
Before you start looking at properties, experts say it is important to work out a budget and consider the fees you will need to buy the property, which will be between 7.5 per cent and 8 per cent on top of the deposit. Don’t forget maintenance and service fees, which vary from area to area, says Jo Phillips, General Manager of Holborn Assets’ mortgage division.
Once you have a budget you can start researching where you want to buy. If you choose carefully when it is depressed, the gains you make in the future could be even greater. “Chose a promising area. This doesn’t mean the most expensive or cheapest,” says Phillips. “Promising means where people want to live for a variety of reasons, i.e. does it have good schools nearby, are there good access roads, what facilities are offered in the area.”
Also speak to your friends and family if they have bought in the UAE in the past to get recommendations as good agents and mortgage brokers are hard to find, she adds.
Arranging your mortgage
You should spend as much time researching your mortgage as you would finding a property, says Jon Richards, Chief Executive of Compareit4me. “Mortgages are the boring end of a property search, but you have to put the time in. It goes without saying that you should search for and compare all available options arguably before you’ve even done a property search,” he adds.
But if the mortgage search sounds a little dull, consider using a broker. They help alleviate the stress by searching the market on your behalf to find the best rate, says Phillips. They usually charge a fee but for that you will receive impartial advice.
Having a mortgage in place will help you bid more efficiently because in most cases pre-approval sellers will not discuss the offer without mortgage, says Dhiren Gupta, Managing Director of 4C Mortgage Consultancy. “A lender or broker will assess your financial position and the income profile, which determine the imminent capability to offset a mortgage loan. In Dubai, one can easily manage to mortgage a property that price in-between two or two and half times of the annual income,” he adds.
Keep a lookout for distressed sales
During depressed markets, property can be sold urgently - sometimes at a loss to the seller - representing an opportunity for buyers to save. “Without wanting to capitalise on the misfortune of others, a slowdown in the economy can lead to an increase in job losses, which in turn can lead to an increase in the number of properties entering the market. This naturally drives prices down further, leaving some to make drastic cuts to their asking price,” says Richards.
However, while there are some good offers around right now, distressed sales are very hard to come by, says Phillips.
Negotiate with the real estate agent
A depressed market means there are less properties being sold, giving you greater opportunities to negotiate with agent, says Richards. “But to do that you need to [be] smart. You should know when to start negotiating and when to stop, so that you don’t lose the ideal deal,” adds Gupta.
Don’t be afraid to walk away
Have a figure in your head and stick to it. And never stretch yourself, say the experts. “It’s important you don’t let your heart rule your head which could lead to you getting drawn into a bidding war. If you’re not planning to spend the rest of your life in this property, it’s important you treat it like any other investment and pay the correct price. Correct being both a fair market rate for the property at a price you can actually afford,” says Richards.
And take some time over the decision, even sleep on it. There is always fresh inventory coming on to the market so there is no need to rush into anything, say the experts.
Avoid a bidding war
Experts say when the prices are already moderate you should make one persuasive offer and avoid the temptation to make any further bids. You should also just use one agent. “With many agents selling the same property sometimes you will be in a bidding war with yourself,” says Phillips. “Use one agent so as you don’t end up being advised of the same property as the seller will think that other people are interested when it is only you.”
Know the seller
Get to know the seller because what you learn could alter your offer, say the experts. “Does the seller moving to new place and want to close quickly? Does the seller want to get rid of a high mortgage repayment or is there a divorce involved? You should ask a lot of questions,” says Gupta.