Trading in Dubai's commercial spaces losing fizz?

Government intervention and stringent mortgage rules are edging out speculative investors from the market, says report

The first hints of 'distress' sales are starting to be sighted in Dubai's commercial space, especially from those who got on to the property market with a short-term investment horizon.

'As global markets squeeze liquidity and local banks reign in access to debt finance, more sales of this nature are likely to occur,' notes the latest issue of the Commercial Review brought out by Better Homes.

It could also be that these investors are taking a cue from what is happening in the global markets, while certain developments in the local marketplace have already left their impress.

'Although the beginning of Q3 witnessed considerable activity, trading in August and September has been relatively flat,' the report, which looks at market trends in the July to September timeframe, notes.

'Besides the obvious damper on activity during the heat and fasting period, the market was also affected by various corruption cases at large developers and financial institutions, which portrayed a negative picture of the real estate market in Dubai.

'A new mortgage law was introduced, making it harder for consumers to obtain finance. This, coupled with new policies and conditions of sale introduced by master developers restricting the immediate resale of properties bought off-plan, is starting to push the speculative investors out of the market.

'In the long run, this is a healthy intervention into the current buying frenzy, and will shift demand onto end-users.'

Sedate market sentiment
Meanwhile, in Abu Dhabi, market sentiments were just as sedate. The pick up in rates in the commercial space recorded immediately after the Cityscape Abu Dhabi in the second quarter did not extend itself into the third.

'The original speculative nature of transactions in areas such as Al Reem Island, instigated by very attractive payment plans in particular, seem to have shifted to the Al Raha Beach area, where premiums offer more upside potential. Al Reem Island is currently attracting end-users and individual purchasers who are more reliant on access to finance.'

Stagnant land sales
'Land sales in Q3-08 have stagnated somewhat when compared to Q1 and Q2. The beginning of Q3 saw increases in land prices, some as much as 20 per cent over rates in Q2. However, towards the end of Q3, transactions slowed frequency and price escalation.'

The Better Homes report outlines trends in land valuations in Dubai during the latest quarter.

JLT - in high demand
Jumeirah Lake Towers is scoring high with investors and end-users alike. Better Homes lists why: