190927 cityscape
Visitors at browse various projects at Cityscape Global, which came to an end at the Dubai World Trade Centre. The region’s real estate show generated substantial interest from investors. Image Credit: Virendra Saklani/Gulf News

Dubai: Want to buy a luxury property in Dubai? But not willing to pay the market price for it? Then just head for the auction.

Whether it be a swanky villa at Emirates Hills or a lush penthouse at Dubai Marina, investors who are willing to wait have a chance to pick them up at a bargain to their actual market price.

Last week, a six-bedroom villa at Emirates Hills fetched an auction price of Dh17.74 million, while receiving 170 bids. The property has a built-up area of 15,000 square feet. And just before summer, another Emirates Hills home was bought for just over Dh19 million — a rate considerably lower than what it would fetched at any other time.

“There are certain properties at Jumeirah Golf Estate, Burj Khalifa and Emirates Hills where prices are comparatively much lower than what it sells for in the wider market,” said Riyaz Merchant, CEO of Realty Force. “The main reason for such properties being placed for auction by their owners is that they have mortgages or remortgages.

The main reason for such properties being placed for auction by their owners is that they have mortgages or remortgages.

- Riyaz Merchant | CEO of Realty Force

“And since the value of these properties has fallen by quite a bit, these owners now believe it’s best not to throw good money (paying off mortgages) into bad (a property whose value is shrinking).

“Sure, individual circumstances change with each seller, but most properties that end up at an auction are mortgaged with banks. The inability of the buyer to make those payments to banks remains the main reason.”

Market sources say that there has been a spike in the number of properties at auctions these days. But demand is also running high — “One could look at it this trend as a win-win,” said one buyer who picked up a home at Emirates Hills. “For each seller wanting to exit, there are so many bidding … and buying. The problem would have been if these auctioned off properties weren’t selling.”

Cash upfront

For their new buyers, there is always the charm of owning prime properties at locations that remain enduring popular. But those wanting to buy via auctions must get one thing done right — they will need to have all of the cash upfront if they win the bid. There is no provision to wait until they secure a bank loan to pay off.

No, cash is the only thing that talks at auctions … “It has to be a cash purchase,” sad Merchant. “It’s not necessary all bid winners have that kind of money to spare.”

Busy auctioneers

Emirates Auction organises one every week, while Rera (Real Estate Regulatory Agency)/Dubai Land Department do it once every 60 days, according to Merchant. “There are several high-end properties that are coming through Emirates Auction,” he added. “We sold an Emirates Hills property at an auction late-2017. Then it got resold within four months netting the seller a profit of 15 per cent.

“With auctions, it’s all about getting the timing right.”

Explaining the reasons for the bargain price

The rule of thumb is auctions allow the buyer to pick up a property at prices lower than what similar properties in the same location command. In a soft market, the chances of the bidder striking it lucky are higher.

Let’s take the situation at Emirates Hills — “There are about 750-800 villas; maybe the one that comes for auction may not suit all potential buyers,” said Riyaz Merchant of Realty Force. “It could be the price, or it could be the design, elevation or layout that works against it.

“That’s why the eventual winner may end up with a good bargain.”

But winners take note — have that cash ready.

Price forecasts

Across Dubai property market, home prices remain under stress, with locations such as Dubailand (down 19 per cent year-on-year), Discovery Gardens (15 per cent) and Sports City (15 per cent) having the sharpest drops in the last 12 months.

19%

Decline in home prices at Dubailand year-on-year

“With existing inventory and future stock brought to the market over 2019-20, sales prices are forecast to remain under pressure in the foreseeable future as the market gradually adjusts to supply and demand dynamics,” says a Core report released just ahead of Cityscape. “The positive offset of the ongoing softening of the sales market is that it is definitely a buyers’ market, with both individual property owners and developers being flexible and in line with market conditions.

15%

Decline in home prices at Discovery Gardens year-on-year

“The secondary sales market, mainly the mortgage market has seen an uptick over the last three years, reflecting that the sales market is increasingly being driven by end users.”