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Index is just the start for the property market

To much applause and ringing of bells, Al Mazaya Holding last week launched the Gulf's first ever property price index. The aim is to provide buyers with the opportunity to select the most profitable real estate investment, by recognising the most active sector in a particular country in terms of value and volume, as well as listing all the prices of real estate activities. But strip away the rhetoric and what areyou left with? Call me a cynic, but what is the real value of a property price index?

The website, compiled from information from 37 regional and international individual indexes by Al Mazaya Holding and Sahara Group, will be updated on a regular basis allowing for monthly and weekly reports and analysis. But what do pretty graphs and analysis reports actually tell the average buyer - that they should have bought a villa in Saudi Arabia last month, or a commercial property in Kuwait last May?
What neither tells you is how difficult it is to get a mortgage and how, in a market based around soaring rent prices, those wanting to buy simply can't because they have to pay six months rent in advance while they continue to save for a deposit.

The figures are plain and simple - this is how many apartments were sold in Dubai last month. But where were they bought and who were they bought by?

The crux of the matter is the fact that the index is supposed to be used as a regional model for everyone in the real estate sector, according to Al Mazaya bosses.

"This index will help to assist the whole market to help forecast the property sector. It will help mortgage strategies and international investors who are considering investment in the GCC," said Khaled Esbaitah, managing director and CEO of Al Mazaya Holding.

While I have no doubt that those wishing to heavily invest in the property market will use the index as well as the analysis, whether it will have much sway with the international banks is yet to be seen. The international banks only offer mortgages to people who are buying from their approved developers.

Surely with the booming property market in Dubai that must mean a wide choice? Not quite. International banks have a strict criteria as to who they will certify as safe developers. You'd be surprised who hasn't been approved. The banks are clear in what they say - they will not offer mortgages to those wanting to buy from someone who hasn't been approved, so how can this index persuade them otherwise?

International lenders are shutting out those that need the finance most by limiting what developments can be bought.

While the index focuses on those properties that have already been bought, it pays no attention to those villas and apartments that could have been bought. Those buyers using international banks are not calculated into the property index, which could underestimate the demand for real estate.

So what about the rest of the population? In order to build a sophisticated real estate market, we have to cater to everyone, and that doesn't just include those that can afford to buy property outright. There are hundreds of thousands of others who do not fit into this category, and their needs should be addressed too.

So while the new index will be rapturously applauded by the wealthy investors, it is unlikely to prove much of a comfort to those prospective buyers who are forced to turn cap-in-hand to the region's international banks. If the lenders aren't on board, then no amount of complex market analysis will plug the gap between the haves and the have-nots.

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