By Shane McGinley
Agents charge commission to both buyers, sellers as revenues plunge by two-thirds
Some real estate agents in Dubai have resorted to charging commission fees to both buyers and sellers in a bid to bolster revenues that have fallen by nearly two-thirds, industry sources said.
Agents who raked in profit at the peak of Dubai’s housing bubble are now doubling up on fees after monthly real estate transactions in the Gulf emirate fell 70 percent from the boom of 2008.
“The fee charged by agents is two percent and this fee is the responsibility of the buyer,” said a Dubai-based agent, who asked not to be named. “What has changed is the opportunity for agents to earn from both sides, as sellers who are keen to dispose of their property can also pay.”
The practice is not illegal if both parties are told of the charges, the agent said.
Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments. Between 2007 and mid-2008 prices in the emirate rallied almost 80 percent, according to Morgan Stanley.
Agents selling during the city’s boom years could earn up to AED250,000 a month as speculators flipped properties and pushed up prices, said Priyesh Patel, real estate agent at Aston Pearl Real Estate.
“In the years of 2007-8 you could expect an average agent to take home between AED50k-80k per month and the better sales agents would take AED150k-250k per month,” he said.
But the collapse of the housing market in late-2008 saw property prices more than halve, and a slew of luxury real estate projects cancelled – which slashed the earning capacity of agents.
“[Now] we are left with better and honest agents whom now still can take home AED30k – 60k per month but there is a lot of work and hours involved these days, whereas before we could earn sitting at our desks,” said Priyesh.
“Commissions have always been fixed at two percent of the selling price but if we remember back to 2007-8 the selling price was much higher. Nowadays, we still charge two percent but selling prices are much lower.”
Tom Bunker, an investment sales consultant at Dubai’s Better Homes, said the practice of charging both the buyer and the seller was prevalent in the market but “not the norm.”
The value of real estate sales in Dubai in the first ten months of 2011 were down 85 percent compared to the same period in 2008, Land Department data shows.
The city saw less than 1,700 real estate deals in the first ten months of the year, a 70 percent decline on sales made at the housing market’s peak.
House prices in Dubai showed signs of recovery in the third quarter, with slight rises in prime projects such as Palm Jumeirah and Arabian Ranches, Jones Lang LaSalle said in September.
Property recruitment specialists Macdonald & Company said in September that average salaries of real estate professionals in the Middle East had fallen to just under AED38,000 per month.
Its annual salary study showed that the average base salary was AED37,965 per month ($10,335), compared to last year's figure of AED38,351 per month.
Nearly a third of respondents received an increase in their base salaries this year, up from a quarter in 2010, the report said.
The average annual bonus rose to AED76,431 from AED73,246 in 2010, a 4.4 percent, with 40 percent of respondents saying they had received a bonus in the last 12 months.
We wish RERA will clarifiy this soon! Many agents are opportunist, they charge tenants too a comission of more than 5%
So the average annual base salary of the respondents is the equivalent of GBP 75,000 - tax free. And we are expected to feel sorry for these poor people struggling to make ends meet?
Double dipping on commission should be regulated as illegal by RERA. The market is at a low ebb and happens to be in the tenants favour at the moment. My personal view is that the commission should always be split 2.5% payable by the landlord and 2.5% by the incoming tenant.
However, there are just too many agencies for the present size of the market, which will never ever return to the extravagant heights of 2008 either in terms of values or transaction volumes. Therefore if there are those that do not conduct themselves in an ethical manner and continue to extort extra money from clients, then they should should have their licenses withdrawn. A natural way of reducing the number of real estate brokerages as well as cleaning up the industry.
Remember uncovered misconduct like this, on top of the continued absence of a legal precedent that will trigger refunds to investors who have made large advance payments but will never see a property, only accentuates a poor reputation!
You know, I wouldnt mind being charged a fee if I actually got something for it. When I pay a real estate agent, I expect him to EARN it. However, as we well know, all these agents do is advertise on Dubizzle or Property Finder or their own sites and then charge you for that. You have to drive around looking for properties yourself. You have to ask to be shown places. Sorry, but for that, I really dont feel like I need to pay anything.
Owners looking to sell or rent - please just use Dubizzle or Property Finder. Lets cut out the middle man who is duping us both!
AED38000 per month....for not doing anything!! and you can double that once you take into account the sell side commission kicking in.
I really can't see the problem here. The market should be allowed to operate on a relatively 'free market' basis when it comes to commissions/fees, there is no need for price-fixing by RERA as some have suggested. If a client doesn't like the commission fee or the service provided then use another agent, it's very simple really (there's plenty of competition out there, so it's far from a monopoly!)
Amazingly, there are honest and dishonest people from each of the following categories: landlords, tenants, sellers, buyers, agents and even website commenter's. It's unfair to tar every agent with the same brush.
This is another example to prove that the law of jungle prevails so far as the property market of Dubai is concerned. One is not sure whether RERA rules cover this aspect of the property transactions. Even if RERA rules cover, if you go to RERA as an aggrieved party, it says that if this has been agreed between you (seller) and the agent, then they can't do anything.
What happened during 2007 and 2008 was madness. However, in the past three years or so, the regulators do not seem to have learnt any hard lessons which they should have. There has not been any law worth mentioning that was passed which ensured fairness among all transacting parites viz., the buyers, sellers, agents, Govt. agencies. Unless this is done, Dubai and for that matter any market, will not see sustained and healthy growth.
Simply amazing, some of the commentary on here........ Have you ever heard he saying "If you pay peanuts, you get monkeys" - well this rings true to all industries, bottom line is the seller and buyer pay a fee for search and acquisition, in addition to a level of service. If you are going to make comments on the real estate market in Dubai, and who should and shouldn't be paid, at least know what your talking about.
Comparably, the lettings market in the US, UK and Australia commissions will start at a minimum of 10% up to 15% for letting your property, and commissions for selling can vary depending on country 2%-8%.
I am a Senior Sales Consultant myself, with big network of specialized agents (the best in their areas),and I know they are not making that much money. Not even close.Other thing, I see some of commentors are not really aware of agent's job.Who ever think agents are only dubizzling properties and doing nothing else, they have a big problem with reality .Even if you want to list a property with Dubizzle and PF, you have to PAY for the ad, and no one guarantee you will sell or rent the property. It's on your own risk. I pay for my ads, I spent a lot of time to list the properties and make the ads, I spent a lot of unpaid time and effort to built my network which I mostly use to sell or rent a property (not Dubizzle or PF), ...etc.
Go and use e-sites if you think it's that simple...and face a months of empty apartments and unsold properties.
If you are dealing with Smith & Ken, be careful. I wanted to sell my property at Victory Heights and wanted it to be sold net to me. A MoU was made for the sale with the net price. Solly their agent comes with an addendum wanting the document to be signed and informed to recover from the buyer. Now they make the claim to me.