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Discuss this article (26 Comments)Property market fails its big test
by This email address is being protected from spam bots, you need Javascript enabled to view it on Wednesday, 27 May 2009
Tuesday saw the UAE’s first ever property auction. Let’s not kid ourselves. It was a flop. A disaster. An embarrassment.
Before the CEO of Madania Real Estate gets on the phone to my CEO to complain about this column, (they often do, you know), let me also add that I have nothing but admiration for Raymond Kuceli.
He is trying something new and innovative in an extremely difficult market, and should be applauded for his efforts.
The staff at Madania are genuine and hardworking. From what I’m told, they put on a good show, which was well organised and structured.
But rather like me trying to play the guitar for the last 42 years, some things are just not meant to be. The concept of property auctions is that a number of dirt cheap properties are up for grabs.
You turn up with a small amount of cash, and walk away with the deal of your life. The greater the personal financial misery of the seller, the better.
Which is where last night went wrong to begin with. According to Kuceli himself, the sellers who put their properties up for sale were merely looking for another sales channel, having tried newspaper and web advertising.
They were not actually that desperate. That’s why no sales were made.
More worryingly, not a single bid was made for 2 of the four properties on show. Why? We come back to the $64 million question: when will the market bottom out? Until it has, or at least everyone thinks it has, nobody is going to buy anything.
Real estate consultant Colliers International says that house prices fell 41 percent in the first quarter of 2009.
According to a report by London-based property broker Knight Frank said house prices in Dubai fell 32 percent in the 12 months ended March 31, compared to a rise of 48 percent the previous year.
This website reported last week that prices on The Palm (for apartments) fell to three year lows just last week.
Only Latvia, a place where I could probably be a professional guitarist, faired worse.
In other words, contrary to the talk of recovery on the horizon, the figures show things are getting worse. All the talk of a “summer exodus” may be over hyped (personally I don’t think it will be that bad) but again, until the summer is over, nobody wants to take any risks.
Tuesday’s auction was the first test of the public’s appetite to get back into the market. Would they come in their hundreds, cheque books and passports ready, eager to prey on the ashes of the property boom?
Well, of the 100 people who showed up, only 9 had registered beforehand to even be allowed to make a bid. Who were the other 91 people? Around 35 journalists and 56 estate agents.
Need I say more?
READERS' COMMENTS
Disclaimer: The views expressed here by our readers are not necessarily shared by ArabianBusiness.com or its employees.
nice article......nice comments
Posted by Shailesh, Dubai, United Arab Emirates on Monday 29 June 2009 at 11:20 UAE time
In Dubai, nobody is intrested in selling or buying the property till the picture gets clear in which direction market will move and thus such auction will see similar results. One can quote the price as low as he desire for buying or as high as he wants for selling. Those percentage fall in property prices are imaginery figures for individual. Writing article and expressing view on it seems to be new favorite pass time................ let keep busy till the market recovers or fall.
Posted by Shailesh, Dubai, United Arab Emirates on Monday 29 June 2009 at 11:20 UAE time
In Dubai, nobody is intrested in selling or buying the property till the picture gets clear in which direction market will move and thus such auction will see similar results. One can quote the price as low as he desire for buying or as high as he wants for selling. Those percentage fall in property prices are imaginery figures for individual. Writing article and expressing view on it seems to be new favorite pass time................ let keep busy till the market recovers or fall.
A good concept
Posted by R.A., Dubai, UAE on Monday 1 June 2009 at 09:00 UAE time
Anil - A very good article, well done.
Property auctions typically indicate the true, market value of a property in a downturn, the price paid in an arms length transaction, between a willing buyer and a willing seller. Not always in an auction in an established, historic market are the sellers distressed but sometimes the asset may have reached the end of its economic life cycle for that particular seller and will provide another investor with scope for a return. Clearly the growth that has been experienced in Dubai over the last 24 months (although I am not sure, no matter how respected a company, Knight Frank can provide realistic statistics when they do not operate in Dubai) was unsustainable and not built on any solid, fundamental investment priciples so house prices only now are beginning to find their real value, after the speculators have been pushed from the market due to lack of finance on off plan properties. It is now that the 'true', traditional investors will benefit. Those who hold property for a number of years not weeks and work a property through it's lifecycle.
The auction was a fantastic idea and well done to Madania for trying to bring a new concept to the region, an incredibly difficult task with the gluttony of properties on the market (in differing communities) that are all the same. Due to this, for the auction to be a success, it's almost essential for there to be distress among the sellers in some form, where there is an absolute need to sell (whether that means making a loss or not) as there is nothing else to differentiate between properties and little, if any, scope to add value.
I'd welcome more auctions in the future but there will need to be some fundamental changes before it will be a real success.
Posted by R.A., Dubai, UAE on Monday 1 June 2009 at 09:00 UAE time
Anil - A very good article, well done.
Property auctions typically indicate the true, market value of a property in a downturn, the price paid in an arms length transaction, between a willing buyer and a willing seller. Not always in an auction in an established, historic market are the sellers distressed but sometimes the asset may have reached the end of its economic life cycle for that particular seller and will provide another investor with scope for a return. Clearly the growth that has been experienced in Dubai over the last 24 months (although I am not sure, no matter how respected a company, Knight Frank can provide realistic statistics when they do not operate in Dubai) was unsustainable and not built on any solid, fundamental investment priciples so house prices only now are beginning to find their real value, after the speculators have been pushed from the market due to lack of finance on off plan properties. It is now that the 'true', traditional investors will benefit. Those who hold property for a number of years not weeks and work a property through it's lifecycle.
The auction was a fantastic idea and well done to Madania for trying to bring a new concept to the region, an incredibly difficult task with the gluttony of properties on the market (in differing communities) that are all the same. Due to this, for the auction to be a success, it's almost essential for there to be distress among the sellers in some form, where there is an absolute need to sell (whether that means making a loss or not) as there is nothing else to differentiate between properties and little, if any, scope to add value.
I'd welcome more auctions in the future but there will need to be some fundamental changes before it will be a real success.
Property market fails its big test
Posted by wildyuvaaa, AL AIN, UAE on Monday 1 June 2009 at 07:38 UAE time
Well done Anil. The open and transparent views of what is happening in Dubai real estate sector are hard to come. This kind of open views should encourage others to follow suit.
For sure everyone who has little common sense should have realised by now that Dubai property market is not down but dead, and ofcourse you cannot bring back something which is nomore.
Posted by wildyuvaaa, AL AIN, UAE on Monday 1 June 2009 at 07:38 UAE time
Well done Anil. The open and transparent views of what is happening in Dubai real estate sector are hard to come. This kind of open views should encourage others to follow suit.
For sure everyone who has little common sense should have realised by now that Dubai property market is not down but dead, and ofcourse you cannot bring back something which is nomore.
Hope to see such honest reports
Posted by AVH on Saturday 30 May 2009 at 11:25 UAE time
Amidst the polarization, with the western media gloating over Dubai's real-estate problems and the local media acting like nothing ever happened, it was nice to see an honest and candid report with a bit of humour thrown in on the side.
I guess that is why I read Arabian Business at least twice a day, wherever I am!!
Posted by AVH on Saturday 30 May 2009 at 11:25 UAE time
Amidst the polarization, with the western media gloating over Dubai's real-estate problems and the local media acting like nothing ever happened, it was nice to see an honest and candid report with a bit of humour thrown in on the side.
I guess that is why I read Arabian Business at least twice a day, wherever I am!!
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