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Real estate chief sees sales, valuations slump
A leading UAE property agent has said that both sales and mortgage valuations have taken big hits amid the slowdown in the real estate industry.
Ronald Hinchey, resident partner, Cluttons Dubai, revealed that company sales were at two or less a month, compared to about 15 during the peak months of July and August last year.
Mortgage valuations, which peaked at about 250 a month for around 17 mortgage providers were also down to 50 per month, Hinchey added in an interview with Arabian Property magazine.
“[Property] management has continued and commercial valuations have continued, and those two departments have kept our business going,” he said.
Hinchey added that he expects to see a drop in the price of residential rents.
“I think residential rents will need to come off their highest peaks by at least 50 percent,” he said, adding that prices would also be affected by the number of people leaving the country, which would slow demand.
However, with some contracts running for one to two years, he said the full scale of price drops would not be felt until 2011.
Hinchey also stressed the importance of affordability in Dubai’s real estate market, adding that young executives should only be paying between 20-25 percent of their salary towards rent, compared with a current figure of approximately 60 percent.
Asked when he believed the market would begin to pick up, Hinchey said: “Given the fact we’re looking into a bit of a black hole at the moment - we really don’t know where the world economy is going, we really don’t know what’s happening to liquidity, we really don’t know what’s happening to demand, a lot of projects have been shelved or cancelled – for people to say everything is going to come right in the second, third or fourth quarter is just wishful thinking.”
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Posted by Ramesh, dubai uae, uae on 15 March 2009 at 09:33 UAE time
I have friends who have invested in year 2008 and have burnt their hands. They jumped in late, they are suffering too much, their money is stuck, because their investments are just sand and only on paper as the construction has been done only 10% in the projects where they have invested. Also the rate per sq ft has been reduced to 50% of what they paid in year 2008. This is what happened to people who jumped in the share market in the year 2008 , they went and jumped in when it was very high and lost money when it nose dived. How do they get out of this, also they paid high rates per sq ft which was the highest in the year 2008, now the construction costs, building materials costs have been reduced by 50% or more. The rate what they paid for booking the properties have dropped by 50%, how do you expect them to continue making payments and in the end get a property which as on todays date is just 50% in value to what they have paid. Therefore RERA must get involved and sort out these cases before the defaulters list bursts in Dubai during may and june 2009. In India, there are number of developers who have slashed the rates even after bookings were collected in the year 2008, because they have to pay less for building materials and construction, and they know pretty well that the buyers will not pay if the rates are high and they will end up with a snowball of defaulters. RERA of Dubai and Ajman must get involved and act as a negotiator between investors and developers and create a buffer zone of rates which will be realistic for the end users and buyers. In Ajman 95% of the projects are still sand, and all of it has been booked. Imagine what will happen there as the action started very late in Ajman.
Posted by Watching from the sideline on 9 March 2009 at 14:03 UAE time
Ramesh,
you sound like an investor who has been able to enjoy the highlife, but now that the business climate is turning against you, you are crying foul and are asking the government to make up for your losses.
Sorry, but that kind of behaviour does not demand any respect. Sometimes you win and sometime loose. It is the true business man who plans for the bad times and can weather the storm only to come out of it stronger.
The people we should feel sorry for are the hardworking people who bought a house at an over-inflated price (due to the speculators who are now crying foul) for their family to live in, lost their job and now have no means of ensuring their family has a family a roof over their head.
Posted by Ramesh, dubai uae, uae on 8 March 2009 at 11:32 UAE time
When we were thrown up like a child in the air, WE had total trust that UAE will always catch us down and then throw us more higher for more fun and joy.
When we were told it will rain WE immediately came out wearing raincoats and umbrellas in hand, We had that much confidence and trust in UAE, and therefore We invested blindly because of the trust and confidence in the UAE
When we were given umbrellas in hot weather but when it rained the umbrellas are being snatched now.
WE humbly request RERA to help us get our money back which we invested in UAE purely on trust and confidence.
Please Cancel all running projects which are completed less than 25% and return our money back to us.
Posted by Rajiv Sehgal, Dubai, UAE on 8 March 2009 at 07:48 UAE time
It was a pleasure to read a candid and objective view from a real estate professional. The dire need of the hour is to take some urgent steps to spur demand and control supply. Some of the suggested measures are residence visa for minimum 10 years to expatriates buying property, UAE Central Bank must push banks to start lending albeit with prudent lending policies, milestone based payments to developers, price reduction by developers on existing off plan projects commensurate with the drop in construction costs, cancellation of projects that are yet to start and immediate refund of down payments, RERA must direct developers to complete projects on a "first in first out" basis.
Posted by Ramesh, dubai uae, uae on 7 March 2009 at 18:05 UAE time
Dubai property market and infact the whole of uae property market especially freehold leasehold ownership titles etc were like a father playing with his child. The father was throwing child up and the child was laughing , the more higher the child was thrown the more fun he got knowing fully that the father will catch him and wont allow him to fall down. But now it seems that the father is not taking care of the child. And all the media and real estate industry in uae are not at all transparent about the real situation of the worse real estate industry on the whole which is collapsing totally. All the projects which have not yet started or have been completed less than 40% must be stopped and then investors money must be returned because its not worth going ahead in these bad times. I hope RERE does this to prove that its taking care of all the parties involved in the real estate industry nicely
Posted by Trojan on 7 March 2009 at 16:29 UAE time
Finally, an honest real estate professional, rare breed these days. I am glad to hear someone from the inside finally admitting to the crash that many of us have been predicting for over a year. Time for those living in denial to wake up.
Posted by MFT, Dubai, UAE on 7 March 2009 at 13:42 UAE time
With due respect to the commentators.....I do not see anything new, same thing has been said 50 times earlier...beauty lies in the eyes of the beholder...you believe some and discredit others....the bottom line is what my friend of use to say on FM 103.9 in Los Angeles radio....... " What you see is a fact and what you don't see is myth....UAE market is going to behave the way it's want to, no matter what anybody says and it will follow the fundementals of Supply/Demand, Perception and last of all money liquidity......
Posted by Hamza Shaan, Dubai, UAE on 7 March 2009 at 12:31 UAE time
This is the most honest and professional opinion stated by any real estate official or personnel in the UAE, the rest of them are here for the money and will abandon the country, employer, investors and anyone for their own welfare. This includes all the new entry professional firms that have suddenly appeared from the west professing to provide advice-they know nothing of market dynamics and only interested in fees.
At last there is an honest man who is prepared to tell and state the truth
Posted by Simon, Dubai on 7 March 2009 at 11:30 UAE time
I have waited for a very longtime for the property industry to say it like it is and to stop the lies and talking up of a market that no one really knows where it is headed.
The fact that he admits it, speaks volumes. I own a real estate company and have sat on the fence with my clients since May last year. The unrealistic price launch of Trump Twr was the real turning point for me. No way was that building going to be worth 13,000dhs/sqft of anyones money.
All it did was point to greed and false pricing. After that point I never sold a unit unless a client specifically wanted something. My clients have started buying again...slowly...but only what they percieve to be value. I sold 3 Springs 4m's last week for 1mil-dhs net. That looks like a good buy because even if the rents fall to 65k/villa its still a good long term investment.
Greens 1beds are now down to 700-750k...again they look attractive for the longterm investor with good rental returns. But they will fall further. I expect rents here to fall to 45-50k/annum for a 1bed.
Not everyone in real estate is out for their own short term gain. I've been here 6yrs and intend growing out of the gloom but with clients that trust my judgement not by lieing and pretending everything is ok. There is a lot wrong with the brokers in Dubai...hopefully the vast majority will leave by the end of the summer.
If anyone really wants to understand what is happening in the world economy and how it effects every nation including the UAE you should listen to the property show on Dubai Eye 103.8, Sundays at 12noon BUT only when MIKE SMALL of VSM is on the show. He is very articulate and explains the world economy and its effects very, very clearly. DO NOT listen to the words of the shows real estate brokers...they know absolutely nothing...and I should know...I hear them all the time. I see straight through their 'market talk' and hopefully the vast majority of this news site do too..
Posted by Mazen, Riyadh, Saudi Arabia on 7 March 2009 at 11:16 UAE time
This is an honest and straight forward gentleman; who tells the truth even though he is in a business that is impacted totally by this down turn. He should be a role model to other who are just hidding their heads in the sand.