High-end property defaults on rise - RERA

FINANCING PROBLEMS: Bin Ghalita said Dubai was seeing an increase in defaults in high-end properties. (Getty Images)

Dubai is witnessing an increase in defaults on high-end properties as financing conditions worsen and is likely to see smaller developers merge, a member of the Gulf Arab trade hub's financial crisis committee said on Sunday.

"There are more and more defaults on the high end if banks do not give mortgages and speculators are [many] in the market," Marwan bin Ghalita, chief executive of the Real Estate Regulatory Authority (RERA), told newswire Reuters in an interview. Tighter mortgage lending, a liquidity squeeze and a real estate slowdown have hit Dubai, part of the seven-member United Arab Emirates federation, in recent months.

Signs Dubai's property boom days are over are increasing as developers scale back projects, property prices fall and jobs are cut. Secondary prices in Dubai and Abu Dhabi fell 4-5 percent in October from the previous month, with Dubai's advertised villa prices falling by 19 percent after several banks tightened lending conditions in August and September, HSBC said recently.

Bin Ghalita sits on a nine-person crisis panel set up to tackle the affects of the global financial crisis on Dubai. The council reports to Dubai's ruler. He said now would be a good time for smaller developers to join forces, and that he expected some to do so.

"If you look at the market a merger between smaller companies would give it confidence. I always support... good mergers in any sector if it adds value to the sector," he said. Last month, Dubai developers Deyaar and Union Properties denied they were in merger talks but were unable to say if the government might order a tie-up.

Bin Ghalita said developers should review projects that had not yet been launched, or where only a few units had been sold. "This is not a good time to start a new project if you don't have enough liquidity to construct," he said.

"Slowing down is very important and this is what we at RERA asked the developers to do about a year back. Slow down and review is very important for the market." Mohamed Alabbar, a Dubai government official who also chairs the crisis committee, said last week the emirate would pull back on its building spree in light of the financial crisis.

Bin Ghalita said the only market that was truly suffering in Dubai was that for off-plan properties. "The only market that is not doing well is the off-plan ... because there are a lot of the speculators on some of the projects. Some of the banks are not dealing with this crisis professionally so they stopped financing," he said, noting some developers were also asking for too high a price.

Prices for "affordable" off-plan properties could pick up in the second quarter or 2009 if banks increase lending, he said. Bin Ghalita said that RERA would enforce a law on the registration of off-plan property sales, after a Muslim holiday next week. Rules for time shares were also being finalised.

"People will be selective in where they put their money," he said. It's not like before where people came to buy anywhere." (Reuters)

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

High end property defaults on rise - because UAE mortgages are going sky high !
Posted by Makes sense to me !, Dubai, United Arab Emirates on Monday 1 December 2008 at 10:32 UAE time

Banks are being urged to give mortgages, as if that is the solution to the real estate problem ! Honestly, who in the current climate would sign up to these mortgages anyway? Nobody in the expatriate community, both here in Dubai and overseas that I know. As an example, our mortgage with CBD,(one of Dubai's oldest and more conservative and customer orientated banks we were encouraged to believe), has just raised our monthly mortgage payment OVERNIGHT by 20%, which on our admittedly huge mortgage is AED 8,000 , approaching GBP 1, 500.00 in our (UK) money!! Of course loans can go up and down ....blah, blah, blah.....we all know that, but NEVER did we imagine that from one month to the next -ie this November to December - the standing order would have to be raised by 20% and we would have to suddenly find another 8,000 dirhams to add to it ! 20% month on month is very steep and for many customers would create precisely the default scenarios that banks and the UAE in general is worried about!

High end defaults
Posted by David, Dubai on Sunday 30 November 2008 at 15:14 UAE time


Interesting article in light if the comments made by Lee a day or two ago in which he rubbished claims that defaults were occuring in Dubai at all, and claimed that there are real "bargains" to be had in the market currently.

I guess he must be one of the tiny minority who have more than a few million Dirhams available to spare and who is also prepared to pay multi-million Dirham prices for the poor quality villa's and apartments on offer across the city, many of which are not worth even 20% of their inflated asking prices?

Perhaps he could enlighten AB readers as to where exactly we might find these "bargains"?

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM