Growing competition dampens realty prices

Having been on vacation last month, I have returned to find that much hasn't changed. Whilst I was away, we lost several deals due to owners selling properties and not informing the agents. It is only courteous to do this and it takes only a few minutes.

Also, owners are not mentioning that they have made late payments to Emaar, hence incurring a two-month ban in transferring. No matter how hard we try to get this information in advance of taking deposits, sometimes the owners just do not want to tell you. Buyers can be just as bad, for example saying that they are cash buyers only to find out they need financing after all. Unfortunately, little can be done without any regulation or ministry back-up.

The market over the past two months has been very strange indeed. I went away end of July and at that time it was possible to buy a two-bedroom springs villa type 4 middle unit for about Dh800,000. In one month, there is nothing available under Dh900,000. That's an increase of 12.5 per cent which is crazy and there's no obvious reason for it.

I thought with most of the expats being away during the summer, the prices would stabilise. The only thing I can think of that has caused this ridiculous increase is the fact that there are now fewer type 4s available and when demand outstrips supply, prices go up.

The same appears to have happened with Nakheel's Jumeirah Islands development. A couple of months back you could get a four-bedroom villa for about Dh3 million. Now there is little for under Dh3.5 million. Considering that the final payment of 50 per cent is due before the end of this year, you may well have thought that most of the investors would now be offloading.

This is a very nice project and the landscaping and finishing is superb. I believe prices will continue to increase over the next couple of months so get in now before they become ridiculous. The Palms seem to be struggling at the moment, especially Jebel Ali which has been going down in price over the past few months. At their peak last year, villas on the fronds were fetching premiums of at least 30 per cent, now they are being offered for as little 13 per cent.

Bearing in mind that the average Jumeirah Palm villa was about 80 to 100 per cent premium, the Jebel Ali Palm should eventually achieve much the same as their launch price was only 10 per cent higher than the Jumeirah Palm. So, if you're looking for a good long-term investment, then the Jebel Ali Palm is your best bet. The reason for the decline in the Palm Jebel Ali properties is that only 10 per cent deposit was paid originally and the second payment of 20 per cent is due officially at the end of next month. This obviously means that those investors who do not have the second payment need to sell them quickly. There is a lot available right now, but there don't appear to be that many buyers.

I have been speaking with agents who have had properties on their books with negative premiums. Something which was, until now unheard of in Dubai. These are mainly in the Burj Dubai downtown and Jumeirah Village projects. This is no reflection on the quality of the developments but just a matter of economics. These properties are a long way off from being finished and payments are becoming due, these seem to be the two crucial factors in determining prices. There is another factor and that is supply. More and more properties are being released almost on a daily basis, and whereas before it was really only Emaar and Nakheel, now there are many more developers and competition is rising. Also other emirates such as Ras Al Khaimah, Abu Dhabi and Umm Al Quwain are now getting in on the act.

But Dubai will continue to be most sought after destination in the Middle Easts for many years to come.

The writer is managing director of Best Value Property Consultants.