Loading...

Follow Dubai Dicussions | Dubai Real Estate Blog on Feedspot

Continue with Google
Continue with Facebook
or

Valid
Residential rents across Dubai registered no change during the first quarter of 2018, helping improve the annual rate of change to 3.1%, from 7.7% at the end of last year, according to leading international real estate consultancy, Cluttons. This marks the first stable quarter for rents in the emirate in over two years.


Cluttons’ Dubai Spring 2018 Property Market Outlook reports that while the rental market has shown signs of stabilising, the growing volume of off-plan investment stock, destined to be made available for rent after the handover, is likely to pose challenges in the future. The ability of the rental market to absorb a high volume of new stock will likely be tested over the next three years, it adds.

Murray Strang, Head of Cluttons Dubai said “We expect newly completed rental properties to command the attention of tenants, while older and more secondary property will register rent falls. This flight to quality phenomenon will likely result in the creation of a very distinctive two-tiered market. In the short-term, we expect rents to slip by up to 5-7% over the remainder of 2018.”

In the sales market, the first three months of 2018 have shown a decline in average residential values across Dubai, falling by 2.5%. However, more affordable areas such as International City, and Discovery Gardens stood out as bastions of stability in the face of continuing headwinds for the market.

Faisal Durrani, Head of Research at Cluttons, said, “Affordability aside, one of the key factors that have likely contributed to the stability in values in Dubai’s more affordable residential areas is the distinct lack of new supply in these markets. We expect demand to remain firmly centred on new homes priced under AED 800 sq ft as affordability takes centre stage in the market”.


Of the 134,000 units,we expect to hit the market by the end of 2020, just over a third are expected to be priced under AED 800 sq ft, underscoring the burgeoning affordability issues that the city is storing up for the future. Even if you factor in some slippage in deliveries of circa 20% to 30%, as has been the case historically, supply will still exceed the projected demand resulting from the organic growth in population, which will see 77,500 households created. While one may argue that supply and demand appear to be well balanced, it’s worth remembering that not all new households will purchase a home; many will opt to rent, in keeping with the transient nature of the UAE’s residents. Developers appear to be ignoring this critical issue at present; however, the new proposed law around the restriction of off-plan sales until schemes are 50% complete may well be a blessing in disguise.”

Cluttons expects the new proposed law to curtail off-plan sales activity, which has remained surprisingly resilient, despite a cooling in demand levels for secondary market property over the last three years. “At the end of the day, such rules are designed to protect buyers and preserve, and enhance the city’s reputation as an investment hub, especially as new international markets are increasingly being targeted by developers,” commented Strang.

Durrani added, “Developers, both large and small will be forced into rethinking their growth strategies and development pipelines are undoubtedly going to be reviewed. We may, at last, see an abandonment of the ‘build it and they will come mentality’, with the city seeing more measure, modest and appropriate homes brought to the market that actually matches the underlying demand.”

The report highlights the law may move developers to contain construction costs by cutting corners, which would ultimately impact investors’ confidence in off-plandevelopments. “While this may clearly be an issue, it does present the government with an opportunity to introduce more substantive building regulations around the quality of construction, with a view to raising the warranty offered on newly completed homes, which currently stands at just one year, compared to other international markets, where it is much higher,” added Strang.

Overall, Cluttons expects values to slip by up to 5% or 7% this year and adds that it is quite likely this trend will persist well into 2019, catalysed by the buoyancy of the supply pipeline, before there is the potential for stability in 2020, once the supply pipeline starts to diminish.


Office market

Like the residential rental market, office rents across the 24 submarkets tracked by Cluttons have remained largely unchanged during Q1, with just eight submarkets registering falls in upper limit rents of between AED 5 sq ft to AED 20 sq ft. On an annual basis, Bur Dubai (-21%) registered the steepest correction in upper limit rents, leaving them at AED 110 sq ft, or AED 30 sq ft lower than this time last year.


“We continue to record a range of activity across the board, from companies expanding to some who are consolidating operations - while there is a wide range of new market entrants, some are attempting to regear existing leases. This depth of activity is characteristic of a normal market where rents are neither rising, nor falling rapidly and is indicative of a market that is healthy and mature,” commented Paula Walshe, head of International Corporate Services at Cluttons.

“Despite this apparent stability, the city’s global nature means it is, more than ever before, influenced by geopolitical events and tensions. Although we are 4,000 miles away from the UK, Brexit is having quite a unique impact here, with some British occupiers looking to make cost savings at lease renewals. On theother hand, US firms, buoyed by positive economic news at ‘home’ are far more positive in their outlook, with a stream of new entrants from the States being complimented by expansionary activity among many US firms based in the city”, Durrani explained.

According to Cluttons, the somewhat static conditions mean that landlords are keen to demonstrate flexibility for the right occupier, with contributions to fit-outcosts. The report finds that an increasing number of occupiers are being motivated to relocate purely on the basis of cost, as well as the perception of getting better value for money. Business bay, for instance, has been the recipient of many occupiers departing from Deira and Bur Dubai over the last 18-24 months who have been drawn to this submarket by the attraction of letting relatively more modern and recently completed space.

“However, in some parts of Business Bay, where transportation and pedestrian infrastructure is still playing catch up, the advantages of relocation may be negated by traffic issues as well as the lack of gravitas associated with a more established central business district. The latter of course comes with the added benefit of extensive street-level retail and food and beverage outlets, which give rise to a vibrant and desirable place to work. This may well change with the opening of Marassi Business Bay and once the area reaches a certain level of office occupancy.

“The decision to relocate for cost savings is both complex and challenging. Often, regearing existing leases, making more efficient use of existing office space, with flexible break options, may be more beneficial in the long run,” commented Walshe.

“Overall, flat conditions will likely linger through 2018, with any rent falls likely to be contained between AED 5 sq ft to AED 20 sq ft. Free zone areas will continue to buck the trend as their position as the most desirable submarkets for most new occupiers remains unchanged and unchallenged. That said, new supply in locations such as the Innovation Hub in Dubai Internet City, Silicon Park in Dubai Silicon Oasis and Brookfield Place in the DIFC will undoubtedly test rental stability in these locations.” Durrani added.

Industrial market

The report shows Dubai industrial rents have continued to drift, following on from a challenging 2017, which saw the market being hampered by an excess amount of speculatively developed supply. This overhang of warehouse stock still remains across all submarkets monitored by Cluttons and is likely to put rents under more pressure as the year progresses.

As highlighted in the report, the market is currently going through a period of normalisation, with occupiers being drawn to more modern, newly completed stock. “Once we work our way through to the end of this upgrade cycle, rents for the olderstock are likely to continue slipping, which will probably catalyse redevelopment of historic warehousing. Until we get to that stage, rents are likely to slip by up to 5% this year, with any declines contained between AED 3 sq ft and AED 5 sq ft,” commented James Lynch, Industrial Agency.

Hospitality market

As part of its expanded hospitality sector services, Cluttons has, for the first time, includingan outlook on the emirate’s hospitality sector.

The report cites data from Dubai Statistics Centre, highlighting that 10 new hotel properties were added to Dubai’s in 2017, taking the total number of rooms up by 4,854 to a total of 82,733 keys. Overall occupancy levels have also improved, reaching an average of 78% last year; up from 76% in 2016.

Cluttons points out that although the hospitality sector remains a bright spot in the emirate’s property landscape, the rising number of hotel and hotel apartment properties, combined with the rise of Air BnB, is likely to sustain downward pressure on revenue per available room (RevPAR), which has continued to decline in recent months.
“We do expect that occupancy levels will be sustained as the city continues its aggressive drive to deliver enhanced tourism infrastructure, which is materialising in the form of new theme parks, world-class hotel resorts and iconic attractions, such as the recently announced QE2 hotel”, said Vikram Malhotra, Head of Hospitality Advisory for Middle East

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Dubai’s real estate authorities have decided to retain the status quo on the percentage developers should put up in escrow before launching off-plan sales. But there could still be significant differences between what developers used to put up earlier and what they have to do now.

In a statement issued Thursday, the Dubai Land Department said developers need to place in escrow 20 percent of the “total project value”. Developers until now had been used to putting up a bank guarantee of the “value of the construction”.

Clearly, there will be a marked increase in developer guarantees if the “project value” is enforced. Project value is much more than the sum of the costs related to construction.

Developers will be awaiting further clarification from the real estate authorities on what this might mean.

There is a strong demand from developers to “deposit the 20 percent escrow of the total value of the future projects they intend to launch”, the Land Department statement had added.
Dubai’s real estate authorities have decided to retain the status quo on the percentage developers should put up in escrow before launching off-plan sales. But there could still be significant differences between what developers used to put up earlier and what they have to do now.

In a statement issued Thursday, the Dubai Land Department said developers need to place in escrow 20 percent of the “total project value”. Developers until now had been used to putting up a bank guarantee of the “value of the construction”.

Clearly, there will be a marked increase in developer guarantees if the “project value” is enforced. Project value is much more than the sum of the costs related to construction.

Developers will be awaiting further clarification from the real estate authorities on what this might mean.

There is a strong demand from developers to “deposit the 20 percent escrow of the total value of the future projects they intend to launch”, the Land Department statement had added.
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Dubai’s developers may no longer be able to rush out with their off-plan sales — they will need their projects to reach the 50 percent mark before they do so. The earlier requirement was for a project to be 20 percentready before sales could be launched.

The provision that developers must have paid off all the costs related to the land remains in effect. (The changes do not apply to government-owned real estate companies, according to informed sources.)

Such a move could have far-reaching consequences for developers — especially the smaller ones — as they would have to wait longer to get funds flowing back into their operations. But the latest changes would be for the greater longer-term benefit of the market, sources add. This would prevent those developers trying to get sales pushing projects with bare minimum down payments and extended post-handover instalment periods for buyers.

Last year had seen a flood of off-plan launches and sales and with the majority of these projects expected to take three to five years to complete. Many had been expecting the pace to be maintained this year as well.

Leading developers such as Damac had been warning the market that these handover terms could have serious consequences if, in a future downturn, buyers stopped payments and developers were left with “dead” stock.

How would more stringent requirements on off-plan launches play out? “The proposal to amend the developer’s law could spur consolidation among (smaller) investor-developers,” said Sameer Lakhani, Managing Director at Global Capital Partners. “A second benefit would be to improve confidence among investors that these projects would be completed — once you reach the 50 percent mark, there’s every incentive to finish the rest.”

According to estimates by JLL, the consultancy, more than 95,000 residential units were launched in Dubai and with likely completion dates before end-2020.

“This is approximatetwice the average demand over the past five years,” said Craig Plumb, Head of Research — Mena at JLL. “If all these units were to be delivered, there would be a likely oversupply and which would have a negative impact on sale prices and rentals.

“Tightening the restrictions on the supply of off-plan units is a welcome response to concerns about a potential oversupply.”

Developers will also need to have a serious think about when they complete a project and how the sales are faring on it. Because any unit left unsold three years after construction will be subject to VAT.

Apart from oversupply, market watchers were also getting anxious about the quality of build of some of the new projects. They warned that cash-strapped developers could start cutting corners just to get the project off their hands.

“The new policy, if it comes into full effect, will reduce the systemic risk that is currently building up on the back of a few developers flooding the market with sometimes poor quality products at heavily discounted prices,” said David Godchaux, CEO at Core Savills.

“The (50 percentrequirement) will act as a screening mechanism for developers. They will now have to ensure they are in a stronger cash flow position to sustain the development risk without the help of capital guaranteed from off-plan sales.

“There will be less short-term pressure on property prices as some developers were competing to quickly attract buyers in the very early phases of their projects.”

Developers sources were unavailable for comment. But the fact that the leading master-developers will not be impacted will ensure that a steady flow of off-plan launches will continue. As for private developers, they will now have to show more “skin in the game” in terms of putting in their own funds and on the project site.

Some developers had privately been voicing concerns that the pace of off-plan launches last year meant a return of speculative buying in Dubai’s property market. For the greater and longer-term good of the marketplace, this had to be nipped.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
In his capacity as Ruler of Dubai, the UAE's Vice President and Prime Minister, His Highness Sheikh Mohammed bin Rashid Al Maktoum, has issued Law No. (19) of 2017 partially amending Law No. (13) of 2008 on Interim Property Registration in Dubai. The amendments aim to protect real estate investors and developers.

The new Law amends Article (11) of Law No. (13) of 2008, which specifies policies and procedures that will be applied in cases of breaches of sale contracts by the buyer. The Law specifies that in such an event, the developer must notify the Dubai Land Department (DLD). Once the notification is received, the Department must give a 30-day notice to the purchaser. The notice must be dated and given in writing and delivered to the purchaser directly by registered mail, electronic mail or any other method specified by the Department. If the developer and buyer reach an amicable settlement, it must be added to the sale contract and signed by both parties. If the buyer fails to fulfill contractual obligations or accept an amicable settlement, the Department may issue an official document stating that the developer has fulfilled his legal obligations, specifying the percentage of completion of the property.

After the developer receives this document from the Department, the developer is free to take any of the following actions: If the percentage of completion is over 80%, the developer can ask the purchaser to abide by the terms of the sale contract, confiscate the paid amounts and obligate the buyer to make the remainder of the payment specified in the contract or otherwise request the Department to auction the property to collect the remaining amount. The buyer is also obligated to pay any expenses arising from the auction. The developer may also void the sale contract solely, retain up to 40% of the sale contract’s value and return the remaining amount to the buyer within a year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier.

If the percentage of completion is between 60% and 80%, the developer may void the sale contract solely, retain not more than 40% of the sale contract’s value and return the remaining amount to the purchaser within a year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier.
If the percentage of completion is less than 60%, the developer may void the sale contract solely, retain up to 25% of the sale contract’s value and return the remaining amount to the buyer within one year of the date of contract cancellation or within 60 days of the date of re-selling the property, whichever is earlier.

If the developer did not initiate the work on the property for reasons beyond his control and without negligence, the developer may void the sale contract solely, deduct not more than 30% of the paid money and return the remaining amount to the purchaser within 60 days of the date of re-selling the property, whichever is earlier.

According to the new Law, if the project is cancelled by a resolution from RERA, the developer must refund all payments made by the buyer, pursuant to Law No. (8) of 2007 concerning Escrow Accounts for Real Estate Development in Dubai.

Pursuant to the new Law, the procedures prescribed in Article (11) of Law No. (13) of 2008 are not applicable to land sale contracts. Such a sale remains subject to provisions stated in the sale contract.

This Law annuls any other legislation that contradicts or challenges its articles and is valid from the date of its publication in the Official Gazette.
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
U.A.E Visa Rules and Regulations: UAE’s non-Muslim expats now register a will:

Non-Muslim expatriates can now dictate where they want their assets to go when they die, after a decision to change rules governing wills. The changes will ensure there is no dispute or confusion over a deceased’s belongings and custody of children, and expats can register a will for about Dh500.

Abu Dhabi has had no way of registering wills drafted in the UAE or an expat’s home country.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
U.A.E Visa Rules and Regulations, Labour Law: Unified rental contract from March 2017 in Dubai:

From
next month March 2017 onwards, all of Dubai's property lease contracts
will have a unified structure, according to the Land Department. The
"Unified Lease Form" is designed to "regulate relationships between all
parties involved in such transactions and guarantees the rights of all
parties," the agency said.
Landlords
will have to download and print contracts from the Ejari website and
must provide assurance that all items included within are based on a
legal framework that regulates the transactions. Items within the
contract will thus be governed by applicable laws, including those
related to rents.
If
any omissions are subsequently found, there is provision for penalties
to be applied. Parties to the contract agreement should agree on the
items before signing the lease.
According
to Hamdan Al Madhani, Director of Rental Relations Regulatory
Department, “The applied unified lease form primarily depends on the
legal system, and having unified contracts between the parties
guarantees the rights of all stakeholders involved.
“The
Rental Affairs Sector carries the responsibility to apply the new
unified lease contract, in addition to registering leases and tracking
the real estate index."
As per Law No. (26)  (under
clause No. 16), the landlord is responsible for maintenance repair, and
repair of any damage or defect that may affect the well-being of the
tenant within the premises, unless otherwise agreed.
Therefore,
there cannot be a clause forcing the responsibility on one party alone.
Law No. (2) is one of the references used to draft the unified
contract. The document also refers to Law No. (33), which regulates the
relationship between landlords and tenants, specifically clause No.
(25), which specifies the cases that enable the landlord to request an
eviction.
These
can include subleasing of the property, or in the case of using the
property for carrying out prohibited or illegal activities.
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 


Properties can be marketed and sold in Dubai only if there is a prior written agreement where the property’s owner authorises estate agents to carry out the marketing process.

This is as per new directives issued by the Dubai Land Department, and in line with earlier moves aimed at creating a more transparent transactional marketplace in the emirate.

Once the written agreement is in place, permits will be issued through the Real Estate Regulatory Agency’s e-service system. It will also apply to advertisements being placed to sell a property or project in Dubai.

All “real estate advertisement mechanisms will be regulated through this system, with Rera facilitating marketing agreements between the landlords and the brokers through its Form A,” said the statement.

“The property owner is required to sign Form A to authorise brokerage offices to market any properties, in order for any broker to obtain permission from Dubai Land Department to represent properties for sale or for lease. The landlord is permitted to deal exclusively or with more than one real estate broker for the marketing of any property.”

According to Ali Abdullah Al Ali, Director of the Real Estate Licensing Department at the government entity, “We regulate the process of advertisements within a specific agreement that defines the role of each party involved in any real estate sales or rent with total precision, which will guarantee the rights of all parties, including landlords, investors and brokers.”

Recently, the Land Department Authorised that marketing of all overseas properties too should have prior clearances before they can be showcased in Dubai. This applies to any marketing exposure across all advertising platforms.

   
  
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
A property purchaser whose sale and purchase agreement was terminated for non-payment and the property is re-sold by the developer without a court order, can file a claim to recover the amounts paid, according to a judgment by the Dubai Court of Cassation.
In a report titled ‘Terminating a contract for an off-plan’, law firm Hadef and Partners said the Dubai Court of Cassation found that going through the Article 11 Cancellation Process was not sufficient to give the developer the right to repossess and to sell the unit, and that a developer still needs to file a civil claim and to obtain a court order for the termination of the existing contract.
“The court took the view that the Article 11 Cancellation Process are simply a set of administrative guidelines/recommendations and they do not override the general requirement that a court should determine the matter and decide whether or not the contract is to be terminated due to the purchaser’s default,” Walid Azzam and Karim Mahmoud wrote in the report.
This general requirement is found in Article 267 of the Federal Law 5 of 1985 (‘the Civil Code’), which provides that a contract can only be terminated “by mutual consent [of the parties], court order, or under a provision of the law”, they said.
The Court of Cassation was reported to have said that if a developer re-sold a repossessed unit; the purchaser (even if he was in default) may be able to recover the payment(s) he made.
“Given the recent ruling, the developer’s actions in repossessing the unit and reselling it constitutes a unilateral termination of the contract, so making the developer liable to repay any amounts received from the defaulting purchaser,” the lawyers said.
In the court’s view, Article 11 Cancellation Process is just an administrative step which is separate from obtaining the court’s approval to the termination of the contract.
The law firm further mentioned that in case of a defaulting purchaser, even if the developer is able to de-register the unit from the interim register prior to re-selling that particular unit, it would be strongly recommended to file a claim against the defaulting purchaser to implement the compensation provisions of Article 11 and to secure a court order for the termination of the contract.
The Dubai Land Department (DLD) cancellation process arises out of Law No. 13 of 2008 regulating the Interim Property Register in Dubai (Law No. 13), which was later clarified and amended by Law No. 9 of 2009 (Law No. 9). The revision of Law No 13 by Law No. 9 was intended to set up a clear termination mechanism and to provide guidelines in case purchasers stopped making their contractual payments.
It also established a specific compensation mechanism that correlates to the construction level of the project at the time of the purchasers’ default. Law No. 9 also made the specific article, Article 11, apply retrospectively.
Article 11 of Law No. 9 provides that:
1.  In the event the purchaser shall be in default of any of the terms and conditions of the contract for the sale of a real estate unit entered into with the developer, the developer must notify the DLD of such default. Thereupon, the department shall give the purchaser, by hand, registered post or e-mail, a 30-day notice to fulfill his contractual obligations.
2. If at the end of the notice period stipulated in the preceding paragraph the purchaser has not fulfilled his contractual obligations, the following provisions shall apply:
a. In case the developer has completed at least 80 per cent of the project, the developer may keep the full amounts paid and request the purchaser to settle the remaining amount of the contract price. If   this was not possible, the developer may request that the property be auctioned in order to collect the remaining amounts due to it.
b. In case the developer has completed at least 60 per cent of the project, the developer may revoke the contract and deduct up to 40 per cent of the purchase price of the real estate unit stipulated in the contract.
c. In case of projects where construction commenced, but did not reach 60 per cent, the developer may revoke the contract and deduct up to 25 per cent of the purchase price of the real estate unit stipulated in the contract;
d. In case of projects whereat construction has not yet commenced for reasons beyond the developer’s control without any negligence or omission on its part, the developer may revoke the contract and deduct up to 30 per cent of the total amounts paid by the purchaser.
Based on this cancellation process, when a purchaser was sent a notice and did not rectify his position, the DLD traditionally de-registered the property from the interim register and re-registered it in the name of the developer.
The DLD cancellation process appears to have permitted developers to address issues related to losses from defaulting purchasers quickly and without having to go through a lengthy court process.
Likewise, the developer also had recourse under Article 15 of Executive Council Resolution No. 6 of 2010 to apply to the courts in the event the monies paid by the defaulting purchaser did not meet the thresholds outlined in Article 11, and to claim for the balance.
“Generally, these laws appear to provide a balance between the needs of developers (who are harmed by both defaults and having to wait for a court judgment to recoup losses) with the interests of purchasers (who stand to have a part of their deposits returned to them).
“However, due to a recent Dubai Court of Cassation judgment, any developer considering terminating a contract through the DLD for lack of payment now faces a great deal of uncertainty,” the lawyers said.
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
U.A.E Visa Rules,Dubai visa Rules,U.A.E Labor Law: U.A.E Workers Welfare Report 2015 Published:





  The Ministry of Human Resources and
Emiratisation has published the first annual report entitled 'Workers Welfare
Report 2015,' highlighting the labour rights in the UAE.

The 2015 report focuses on
measures to ensure that all workers that come to the UAE "are recruited
and employed equitably, safe in their place of work, and free to advance
professionally and personally."

The publication of this report
is part of a drive to increase transparency about labour issues, improve data
reporting and ensure that discussion about the transnational labour mobility
and economic development is frank and fair.

In a forward to the 2015
Report, Saqr Ghobash, Minister of Human Resources and Emiratisation, remarked
that "The UAE’s workforce is our greatest asset: the driver for growth
that enables economic diversification and secures the future for tomorrow’s
generation."
Ensure Workforce Protected
"The Ministry of Human
Resources and Emiratisation is committed to ensuring our workforce is protected
and its dynamism is harnessed for the good of all. Therefore the ministry has
launched a series of initiatives and resolutions to promote workers' welfare in
the country, most notably, Standardising labour contracts in order to promote
clarity and transparency for workers and employers," he added.

He further elaborated that the
ministry launched new laws that "Enable workers to move freely between
employers, as well as evaluating and reviewing every aspect of working in the
Emirates from recruitment to housing and making significant reforms designed to
ensure all workers are treated respectfully at all times, and able to report
instances of maltreatment easily."
Legal Professionals to help Labour Disputes
The minister said that MOHRE
has appointed 63 legal professionals to help resolve labour disputes, and
trained 100 members of staff to facilitate the process of dispute resolution.
The ministry has also implemented a new, dynamic smart inspection system to
enable the inspectors focus their efforts on higher risk business
establishments.
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Dubai property prices could fall 10 to 20 per cent over the remainder of this year and early 2016, according to the ratings agency Standard & Poor’s (S&P).

But developers are better placed to cope than in the 2008-09 crisis, according to the agency.

The decline in values is taking place “after three years of sharp price appreciation” and is due to an increase in supply, S&P said.

It cited figures from the property data provider Reidin which anticipated 20,170 units to be delivered in Dubai this year – compared to the three-year annual average of 11,600.

Although it expects domestic economic growth to “slow markedly” in 2015-16 as a result of lower oil prices, it adds that the economy is more diverse than in 2009, when property sales were a key source of revenue.

The population is growing at a rate of 5 to 6 per cent in Dubai and 7 to 8 per cent in Abu Dhabi.

Tourism numbers should also hold up, and regulations such as the federal mortgage cap introduced in 2013 and mandatory requirements for developers to use escrow accounts for off-plan sales have reduced the risk of defaults.

S&P argues that the drop in demand is because of fewer non-residents buying properties.

“In early 2015, for instance, non-resident demand from Russia and other member countries of the Gulf Cooperation Council was particularly subdued.”

Major players in the market, such as Aldar Properties, DIFC Investments, Damac Properties and Emaar Properties, have managed to diversify revenue streams, as well as improve their own balance sheets and cash generation over the past two years.

The ratio of their debt to Ebitda dropped to 1.9x at the end of 2014, compared to 3.3x at the end of 2008.

The S&P credit analyst Franck Delage said that the major developers had attracted more money from rentals, which means that their income streams are more predictable.

“It gives good visibility on revenues. It gives a cushion of resources and helps to cover interest charges on a more predictable basis,” he said.

He added that they were more flexible in terms of revenue mix, with many capable of adapting their product range to produce more budget properties if required

“Since there has been a few years of strong price growth, demand could be more price-sensitive.”

A sensitivity analysis conducted by S&P for the report argued that even if the market performed much worse than predicted, with average selling prices dropping 30 per cent and current interest rates doubling, it would have little impact on the credit rating of major developers.

Read Full Article

Read for later

Articles marked as Favorite are saved for later viewing.
close
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Separate tags by commas
To access this feature, please upgrade your account.
Start your free month
Free Preview