Dubai: There is a sense of crisis sweeping through Dubai’s real estate brokerage firms as some of the smaller ones shut shop and the bigger ones start laying off agents. The concerns could be further exacerbated with the Ramadan and summer breaks looming, which could find more brokers without a job to hold on to.
Matters have not been helped by developers with recent off-plan launches preferring to deal with a single brokerage firm to do the selling. In some cases, developers have let their in-house marketing teams handle the sales aspect as well.
“The fall in transactional activity has led to many brokerage houses becoming operationally unviable ... in the process, some unscrupulous activities, too, have been exposed causing buyers to suffer losses,” said Sameer Lakhani, Managing Director at Global Capital Partners.
“While in no way comparable to the quantum of losses suffered by investors in 2008 — largely due to increased oversight by RERA [Real Estate Regulatory Agency] — it still affirms the fact that further tightening may be needed ... especially to protect small investors.”
By some reckoning, more than 10 brokerage businesses have made an exit in the year to date. And just recently the number of lay-offs at a fairly large firm in Dubai has gone past the 50 mark, sources say.
According to official data, there are more than 2,300 firms registered with the Dubai Land Department to offer brokerage-related services.
According to Juwaad Beg, CEO of Al Madina Al Raeeda Real Estate, a developer that does a lot of its own sales: “The virtual disappearance of secondary market transactions has impacted more than 80 per cent of the brokerage firms. Only those agents who can call on a committed clientele base can hope to survive this shake-out.
“There were way too many who had entered the industry when they saw easy money was coming in during 2011-14, and the impression was that it would sustain itself all the way through to 2020. Clearly, that didn’t happen and smaller firms who had taken on too many suffer disproportionately.”
As secondary sales tail off, demand for valuation surveyors will also start feeling the heat, sources add.
“There’s always a lag — of around four to six months — between the drop in transactions and the same being felt by specialist surveyors,” said Robin Teh, Country Manager at Chestertons MENA. “Banks are one of the biggest sources of business leads for survey related activities, and those are going to come down as they are fewer buyers scouting around for property in secondary market deals.
“Every business will have to engage in trimming the fat in such circumstances ... and that means having to let people go. Painful decisions certainly, but a reflection of market reality.” Teh’s firm has put on hold new recruitments.
But there are some — currently very much a minority — who feel there is no need to get overly concerned about the market situation and job stability.
“The prices in Dubai had gone up substantially after the Arab Spring and until Q1-2014,” said Kalpesh Sampat, Director at SPF Realty. “So, the last year has been one of a healthy correction. It is one of the signals that the market is maturing and that the price movements will be gradual, not steep.”
Sampat was also bullish about developers in Dubai still having a place on the table for brokerage firms.
“Though they may have in-house sales teams, most of them usually still engage brokers,” said Sampat. “If they stop using brokers altogether, that would be worrying.
“But we see Emaar, DP [Dubai Properties], Nshama, Nakheel and many others offering their projects to brokers ... indeed encouraging them to sell more.”
A reasoning that Beg agrees with — “A good broker has got contacts with the right buyer that a developer just will not be able to replicate easily. But for the moment, everyone needs to keep their heads down.”