Real estate firms Gulf Sotheby’s International Realty and Asteco announced a strategic alliance last month in the area of off-plan sales. George Azar, chairman and CEO of Gulf Sotheby’s, and Elaine Jones, executive chairperson of Asteco, tell Property Weekly the reason behind the alliance and how market dynamics are fast changing in the UAE.
This alliance comes at a very strategic point and time, when there is a lot off-plan coming into the market. How do you complement each other?
George Azar (GA): Elaine’s background and knowledge of the market are second to none. She is like a market maker in terms of research and data. At Sotheby’s we advise our clients on how to off-load this stock, how to come out with the right financial product. We show developers the best way to absorb the stock. While Asteco is a regional powerhouse, we are very strong in many international markets. Both teams can add value to each other’s business, giving developers solutions to a lot of problems in the market today – be it liquidity or sell-out solutions. Our job is to structure the sell-out in the best way where the developer gets his share, and the buyer looks at it like a great deal.
- George Azar, chairman and CEO, Gulf Sotheby’s
Elaine Jones (EJ): We have been in the business for long. We started with project sales and have the systems and the methodology in place to do the actual sales, and monitor the progress of sales transactions. Our staff have been with us for a very long time and they are very focussed on the projects they deal with. It becomes their passion -- from the time a project is being planned and built till the time it comes to the market. We have that knowledge of what’s gone before, what sort of buyers buy what sort of property. In this ever-changing, dynamic market, our research and consultancy team gives advice to clients on what to build – and helps bring projects to the market. And although we are focusing on off-plan, we have been approached by many who have stock that is virtually completed. Also for buyers, particularly residents of the UAE and the region, the choices now are spectacular. Many areas are now mature, perfectly established with schools and hospitals and all the lifestyle elements. The choice for buyers are absolutely huge.
How do you choose your projects?
GA: When we look at a project, we see if it is a triple AAA product. We see the quality of design, construction and the completed product, coupled with transportation and support facilities. We don’t want to sell it to people who come back after three years complaining about the product. The quality of the product is key for us.
EJ: When we brainstorm about a project, we brainstorm the reason why we would want to work on a particular project – why would people buy the project? Would they buy to live in it or buy to rent it out? We talk about which projects are going to sell and we pick the developers accordingly. They need not necessarily be big developers but they need to be financially healthy to ensure that the project gets completed.
This partnership also comes following the recent amendments to Dubai’s off-plan property purchase law.
EJ: Yes, there have been improvements in legislations with regards to developers being able to sell property off-plan. There are escrow accounts now and developers have to demonstrate they have sufficient capacity to take a project to the market and buyers’ money is more secure. So a lot of issues that we had in 2008-09 have fortunately been addressed.
Do you agree there is an oversupply in the market?
EJ: Well, there is an oversupply situation in certain segments. But that’s positive for the average tenant – and it’s positive for business in general because it means cost of doing business and cost of people living here is actually adjusting itself. His Highness Shaikh Rashid Bin Saeed Al Maktoum always used to release more inventory into the market through the ruler’s office that had its own property department, and whenever the prices went up too high, he would build more. But of course the difference today is that there are many other sub-developers in the market. We anticipate there will be more control and more effective urban planning to moderate and ensure that we are not getting an oversupply – that is where maturity comes.
I would say the projects under construction in certain segments will bring prices down – but that also means the market will allow people to come and live here – especially those who would previously have not come.
- Elaine Jones, executive chairperson, Asteco
Will millennials make up the biggest percentage of next-gen renters? Can you talk a bit about this trend?
EJ: The housing landscape has dramatically shifted in the last few generations. And today, globally we are seeing how renting is increasingly becoming a more desirable option, especially among the millennials. Home ownership is not a top priority for many of that generation. They want the flexibility to move and explore job opportunities and avoid home maintenance responsibilities. They no longer feel the need to buy a home the minute they can afford to, but rather would spend the money on travelling or paying off their student loans. And in an expat-driven, transient city such as Dubai, we are seeing this becoming increasingly the norm, as most millennials want the freedom to chase the next big opportunity, without being tied down by a mortgage.
Do you think a lot of buyers and investors are pinning their hopes on the World Expo 2020?
GA: I don’t think it’s possible to ride the wave of 2020 anymore. Any smart buyer would think beyond that. Dubai has always been in the forefront of innovative ideas so there will be new things to keep the economy growing. We have to look at the long term. There is cash in the market – but the cash is smart money.
EJ: I think 2020 gave us a focus – it drove us all but we are much more focused on 2030 now. Thinking short term does not work. We have visionary leaders here that set us apart from the rest of the world. Also the world is changing so rapidly. In 1980 what did we have on Shaikh Zayed Road -- we had the World Trade Centre, the Rostamani twin towers and the Defence Roundabout and there was Safa Park and villas around it. Look at what Dubai is now. But I do not imagine that we are going to see the same amount of growth unless we have more economic opportunities, more employment opportunities for people. In this changing world where there is more focus on technology, you don’t need the same kind of space. A lot of people work on their own, they are single entrepreneurs, so we don’t need so much commercial space. People don’t employ many staff, so there is not so much workforce. Also people don’t have so many children, so it’s such a changing world.
But we need organic growth. Permanent residency is absolutely vital. Many people leave because they are not able to settle here or get their children settled here. Without a permanent residency, without a commitment that you could live here if you did not work, people will not get that confidence to stay here long term.
Any advice for the buyers?
EJ: It’s important that people think very hard where they put their money. Be mindful that you get what you pay for. No one today in my opinion would release a product that they are not making money out of. If you look at the value of a property per square foot, you acknowledge there is a land price and there is a cost of building the property, so then how can it equate that you can buy something for such a low amount of money – what size would that property be when it is finished? People should do some due diligence. Maybe you should walk the area of an apartment that is being offered to you. Do your due diligence.
