Dubai: More property owners in Dubai are going direct in trying to sell rather than involve brokers in a bid to cut out transaction costs where possible. Such “direct listings” had been on a steady increase since the second half of last year, but saw an appreciable spike in the last three months.
Such sellers are using up all available platforms, real estate portal or by way of old-fashioned word of mouth, to try and get through to a buyer. And preferably without any sort of involvement on the part of a broker.
Average broker fees in such transactions are 2 per cent of the property value, though these could also go up to 4 per cent.
While avoiding broker fees is an aim in itself, other factors may also be influencing sellers to seek out buyers on their own. “In the current environment of soft prices, a lack of credibility (of some brokers) has certainly played an role in the surge of direct listings,” said Sameer Lakhani, CEO of Global Capital Partners. “In the recent instance of a prominent broker going bust, there were numerous instances of “price gouging” (the arbitrary hiking of values) as well as funds being misallocated that came to light.
“The Dubai Land Department and Real Estate Regulatory Agency have taken pains to instill transparency in the brokerage sector and these practices had declined significantly from what was occurring a few years ago.
“What direct listings have done is it has allowed for a more transparent mechanism of price discovery without the middleman resorting to price gouging tactics. In recent documented cases, this has been as high as 5-10 per cent in certain cases.”
Handful of closures
All of which makes an already difficult situation for local brokerage firms even that much more so. In the first half of the year, there were a handful of closures, though these were brought on by a lack of business to get by on.
Interestingly, the direct sell-offs have been higher within the newer communities or within the off-plan developments. Also, most of such direct selling has been for properties tagged as the high-end.
“This is natural as investors — as opposed to end-users — dominate the buying pattern in newer locations,” said an industry source. “As these mature, the incidence of listings reduce as end-users start to dominate. On the other hand, International City and Discovery Gardens still have a large number of listings. Despite these communities being older, they are still dominated by investors as opposed to end-users.”