By Daniel Shane
As former executive at Dubai Waterfront, Ammar Abulohom was responsible for selling plots at one of the emirate’s greatest projects that never was. He tells Arabian Business why his faith in Dubai’s property market is now stronger than ever
Nine years ago, Ammar Abulohom says, he felt like a celebrity. As one of the executives in charge of selling plots on Nakheel’s Dubai Waterfront, the Emirati estate agent was at the forefront of the city’s then booming property market.
The Waterfront, announced in 2006, was at the time one of the most ambitious real estate projects on the planet, including everything from artificial islands, world-class amenities, to a harbour the size of Hong Kong.
Of course, we all know what happened afterwards. The Dubai real estate market tanked in 2008, with properties quickly shedding up to 60 percent of their value, while the Waterfront itself sank when master developer Nakheel was forced to restructure approximately $11bn in debt.
While he may not feel like much of a celebrity these days, as CEO of boutique real estate broker Dar Al Aqar, Abulohom again is well-placed to capitalise on the recent resurgence in the emirate’s property market.
“We are seeing now clearly that people are coming back to Dubai and looking for opportunities, whether that’s a job or for investment, and that’s creating demand for real estate,” he tells Arabian Business. “That drives the prices higher.”
According to analysis by real estate consultant Jones Lang LaSalle, average prices in Dubai rose by more than 20 percent during 2013, and could reach their 2008 peak before the end of this year. Dar Al Aqar, whose chairman is also a former Nakheel executive, probably knows the ups and downs of Dubai property better than most.
“There is a very positive sentiment in the market in Dubai, overall, in real estate and in the economy. The anticipation before the Expo announcement brought in good interest, good demand, and we’ve seen after the announcement good growth in the market overall,” Abulohom says.
He believes that the market has learned its lessons from last time round, and that a more measured approach from developers, investors and regulators will prove for a leaner, more mature growth curve.
“What we used to see was 90 percent finances, and this was open, you could take as many units [as you wanted], beyond the capacity of the individuals applying,” he recalls.
Abulohom points to some of the regulations that have been implemented by both regulators and developers intended to cool the market, which he says have made recent growth in the market more sustainable. These include the doubling of land transaction fees from 2 percent to 4 percent, the tightening of availability of mortgage lending, and a minimum payment of 40 percent required by some major developers before a property can be resold.
“Of course this will narrow the number of units that can be taken, but this is exactly the objective to protect the market from those short-term investors that want to take advantage of the financial system,” he believes.
Dar Al Aqar, which was founded in 2012 in Dubai, provides brokerage services for both experienced and first-time investors seeking exposure to the emirate’s property market, as well as assisting in matching local developers with potential clients. Together, the company’s management team has completed more than AED20bn worth of deals.
Abulohom says that the firm attracts clients both across the Gulf and further afield, and specialises in digging out assets that are “fairly valued” with good growth potential for the long-term. “We first understand their appetite and what kind of risk they want to take, whether it’s long term or short term. It’s exactly like private wealth management,” he explains.
Even amid soaring property prices across the emirate, which experts say are likely to continue rising following the successful Expo 2020 bid, Abulohom says that there are still bargains to be had. “We do like certain projects, as personal selections for our investors. We like to go into areas that have room to grow. Our criteria include location, quality of community, who is the developer,” Abulohom says. “We like Business Bay, Downtown [Dubai], Dubailand projects, but also we like to work on the more exclusive projects and smaller communities like islands and the Palm [Jumeirah].”
Abulohom’s assertion that he sees Dubailand as an alluring investment may come as a surprise. Unveiled in 2003, the master development was at the time on a scale of little else on the planet, including hotels, theme parks, shopping malls and residential clusters. Like numerous other projects in the emirate, it was put on hold amid the financial crisis in 2008, before unofficially being revived with the announcement of the Mohammed Bin Rashid City mega development last year.
He says that following the completion of much-needed infrastructure work in the area, select developments at Dubai Motor City and Dubai Sports City have become hot tickets for property investors.
“We anticipate that there is a lot of room to grow, and we’re seeing a lot of projects coming up that we like, [in terms of] the quality of the community. It’s a good entry for most buyers because the prices, although they’ve picked up, they’re still within reason,” he believes.
Dar Al Aqar is happy to put its money where its mouth is when it comes to these recommendations. Under Arabian Global Investments, an AED300m investment vehicle with ties to Dar Al Aqar, the firm has remained an active participant in the property market.
“We’ve invested ourselves in the market throughout the years, even through the 2008/2009 crisis,” says Abulohom. “When we look at any opportunity in the market, we see it from an investor’s point of view. We do all the homework.”
Despite the previously mentioned regulations introduced by developers and regulators, such as lending caps and minimum down payments, Abulohom concedes that speculation is currently present in the market, although not to the extent that preceded the prior crisis. He says that he often advises his own clients not to engage in speculative investing, or ‘flipping’ as the practice is informally known. “What we saw was speculators coming back into the market, with short vision. We advise our clients that very short-term plays in the market are becoming very risky. We tell them, ‘if you can’t afford it, don’t buy it’,” Abulohom claims.
Abulohom admits that some speculation is good for the market to an extent, but not in the extreme short term. Over the past few months, everyone from developers, to consultancy firms, to even Dubai’s own regulator, has been guilty of chucking fuel on the fire. For example, in a media interview at the start of this year, the director of Dubai’s Land Department said he expected prices to increase by as much as 40 percent during 2014.
“It’s down to the different players in the market. You have the developers, the financial institutions, the central bank, RERA and the brokerage market. They all contribute to hyping the market [and] bringing the speculators,” he believes. “There will always be speculators, but we want them to be long-term speculators.”
In January this year, while upgrading its economic forecast for the UAE, the International Monetary Fund (IMF) warned that Dubai’s real estate market appeared to be entering a bubble similar to that seen prior to the 2008 crash.
While such statements from global bodies like the IMF are enough to give investors sleepless nights, Abulohom is slightly more relaxed. He argues that such “corrections” are part of the cyclical nature of all global property markets, and provide entry points for investors.
“We do expect corrections like any other market. If there is growth in the prices, or sharp increases, then corrections will take place,” Abulohom claims. “But this is also an opportunity for many end-users and investors to enter the market at a lower rate. People have to adapt to this and acknowledge it. Over the long-term it will not be a one-way ride, there will be some corrections.”
Amid the rebound in the market over the last 12 months, a number of stalled developments have been revived, including Nakheel’s Palm Deira (rebranded as Deira Islands) and Emaar’s The Lagoons. Abulohom, who at Dubai Waterfront experienced the frustration of a major project running aground, says that he expects developments including this one and Palm Jebel Ali to be reinitiated sooner rather than later.
Testimony to this, he says, is the choice of site for Expo 2020 in the Jebel Ali district to the south of the city, which he believes paves the way for this area to become the “new Dubai”. Given the location of the new Al Maktoum International Airport in the vicinity, Abulohom says it makes sense to now revive Dubai Waterfront and Palm Jebel Ali, which are located nearby.
“The last natural beaches in Dubai are there, you have Palm Jebel Ali, across Sheikh Zayed Road you have the Expo, the new airport. This is the new Dubai. This is the story that we always believed in. This is where the room for growth is in the longer term for Dubai,” he believes. “They’ve saved the best until the last. We always believed this area would become much better than any other area. I have no doubt that the plans for the area are great now with Expo.”