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Sun 3 May 2020 02:05 PM

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Dubai property: stop bashing brokers. We're here to stay.

Property companies will come out stronger after Covid-19 as Dubai's real estate market will see a sharp economic bounce back

Dubai property: stop bashing brokers. We're here to stay.

Lewis Allsopp, CEO of Allsopp & Allsopp

The recent article, ‘Bye Bye Brokers?’ certainly caught my attention with its bold and shocking title.

After delving straight into the content I couldn't help but be taken aback by the stereotyping of Dubai’s real estate brokers. Real estate brokers are not all Porsche driving, Zuma eating and Armani suit-wearing individuals but more likely modest people who are working hard to support their families here and in their home country, putting food on the table, a roof over their head and enjoying one of the world's most exciting cities and gaining some life experience.

Yes, some brokers are extremely good at what they do and they earn a good living, but why should they be judged for this and brandished with ridiculous stereotypes?

Industries worldwide are being affected by the Covid-19 pandemic and real estate is certainly one of them as is media but we don’t see the same condescending articles written about other industries. We certainly aren’t reading articles like 'Bye Bye Journalists - swapping media mingles for a handful of Pringles' - yet I’m sure that media advertising spends are being cut and certain media outlets may be struggling as a result.

This is happening to us all and certainly isn’t an invitation to critique and stereotype occupations whilst using outlandish titles as clickbait.

I wanted to address some of the points made in the article to give readers an understanding of exactly what is going on in the Dubai real estate market on the ground level from the agents who are on the front line.

First of all, pre-Covid-19, we were receiving multiple offers on a single property, something we hadn’t seen for many years. It is no secret that there are a lot of properties in the Dubai property market, but finding a property which is vacant on transfer with a motivated owner and a realistic price is very difficult to come by, so when these properties become available, they can sometimes lead to bidding wars.

This is an early sign of potential green shoots in the market and even more encouraging is the data from the Dubai Land Department showing a 10 percent growth in property transactions in Dubai from Q1 2020 versus Q1 2019.

A different market

The 2008 Dubai property market is referenced often in articles related to real estate and ‘Bye Bye Brokers?’ was no different. Covid-19 has been referred to as leading the Dubai real estate market down the same path as the crash in 2008, however, 2008 was 12 years ago and we know and remember it all too well as it’s the year we launched Allsopp & Allsopp.

We are no stranger to the peaks and troughs in a real estate market and can confirm that Covid-19 will not turn into the same situation we all went through in 2008 because in 2008 the majority of owners had a piece of paper to say they were they owners of an off-plan property maybe having paid 2.5 percent, 5 percent or 10 percent of the value as a down payment to then flip the property onto a new buyer with a substantial profit.

I personally bought properties I physically couldn't afford with the hope of flipping onto a new buyer before the next payment (I was 20 years old buying a floor in Abu Dhabi for around AED20m with 2.5 percent down payment and with the hope and prayer of selling it on). The whole property market in 2008 was leveraged on new sales with buyers buying properties they couldn’t afford in the hope that they could flip them for a profit.

However, when the crash happened, buyers couldn't re-flip their property as the buyers dried up meaning developers didn’t receive their money which created a domino effect on the whole property market.

Fast forward to 2020, the demographic of buyers and residents is very different. The majority of Allsopp & Allsopp clients are end-users meaning they are not leveraged on payment plans and are mostly living in their homes so they often have less pressure to sell. If the property is an investment it is most likely rented, even if it was a developer payment plan the plan would be heavily paid before completion, so when we start to dig a bit deeper we can see the whole dynamic of the property market has matured with a much more stable client who is looking at Dubai as their home and not looking to make a fast buck.

Slow down in off-plan

My forecast for the future of the Dubai property market depends a lot on the economic situation for the average expat. Dubai is not leveraged on the price of oil, however, it is heavily dependent on tourism, construction, real estate, and in my opinion, most importantly, the normal working class having a job to continue the stability of the economy.

The main shake-up in the property market will be with developers in Dubai. I believe they will be hit quite hard as I can foresee investments in off-plan slowing down and developers concentrating on the handed over properties, but their prices are currently sitting considerably above the resale property prices in the market due to the last five or six years of being in a soft market, and this is something I can see developers having to deal with.

However it will be causing them damage to their asset and the total value of their businesses as a complete revaluation will be needed on their ready stock which will have a negative impact on the public listed companies who would need to write down substantial losses on paper to bring the prices to market value to get their properties sold. But this is what developers will need to do to compete in the ready property market.

Sharp bounce back

When looking at the short-term knock on the economy, cabin crew and pilots have been grounded and have had their flying pay taken away from them, some teachers are on limited or no pay, all Dubai gyms remain closed, fitness instructors are restricted in their work and many of the food and beverage workers have been on unpaid holiday. The list can go on, and all are these are real situations who have agreed to buy through Allsopp & Allsopp and now cannot do so due to Covid-19.

However, the majority of people who I talk about here will be rehired; cabin crew and pilots will be needed again when airlines resume normal operations, gyms will need instructors, and schools will need teachers. So, in my opinion, there will be a sharp bounce back in economic performance as people will need to be employed to have a business resume as normal.

I think the biggest effect we will see from Covid-19 is going to be on small businesses with limited cash flow who don't have the option to furlough like the UK who have had their salaries paid by the government. Rents will still need to be paid and with limited income and limited support, many small businesses will be in danger of closing down.

In my opinion, if these companies do close, it will mostly be down to their business model not fitting into today's world. For example; Amazon, Apple TV, Deliveroo, and more locally InstaShop and Cafu didn't exist years ago but are some of the world's or region's most successful businesses or start-up innovations. My car at home is now charged by a plug in the wall, that's how crazy and innovative the world is becoming!

Life and business evolve and those who are willing to evolve will prosper. Some businesses will see this as a time of hardship and some will see it as a time of opportunity.

The one constant through it all is property, people will always need somewhere to live whether it be rent, buy or invest and this is why property companies who evolve will come out stronger with the right business plan and the ability to change with the times.

Lewis Allsopp, CEO of Allsopp & Allsopp

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