With Dubai’s property prices in cool-off mode, prospective buyers are in no hurry to seal the deal in the secondary market. The average time taken these days now average anywhere up to five to six months from the time an investor decides to buy to actually signing the papers for the purchase.
“The transaction periods are getting longer — it used to be one or two months through the better part of last year, even considering the fact activity slowed down during the second-half,” said Chandrakant Whabi, CEO of Acrohouse Properties. “In those days, the buyer would want to close it in the shortest time frame, as values would have shot in the days and weeks it took to clear the paperwork.
“It’s the reverse now — stretching the buying process could land the investor a better deal because secondary market prices are still cooling off.”
Another factor that has lengthened the whole process is that secondary market activity is currently dominated by end-users, especially active in the clusters/communities where prices have corrected substantially. Or in emerging locations where property values are still seen as being easy on their pockets.
In contrast, cash-ready buyers are keeping relatively quiet in picking up properties through the secondary channel. Instead, this buyer category have been plumping for exposures in the spate of off-plan launches that took place in the first-half, despite off-plan sales carrying an additional 4 per cent of the property’s value — as ‘Oqood’ charges.
Overseas buyers are also hesitating over the dollar. “This could impact short-term investment adversely,” said Robin Teh, Country Manager, Chestertons UAE. “But long-term demand remains intact as currency fluctuation tends to even out across longer time frames. On the positive side, investors are now ready to sell their property for lower as they will get a higher amount in their home currencies, which is acting as a systematic cooling measure.”
As such, secondary market volumes have dropped by around 50 per cent in the first half of the year.
But chances of a correction in property values touching similar levels are unlikely, according to a new poll conducted among business executives by the London Business School. “The vast majority of executives surveyed do not believe that there will be a drastic decline in residential real estate prices over the next 12 months” Joao Cocco, Professor of Finance at the School, said in a statement. “Only 3 per cent of those surveyed expect an annual decline larger than 20 per cent.”
The survey was conducted among more than 200 respondents to analyse the possibility of another real estate ‘bubble’.
During 2009, values had gone into a nosedive by as much as 50 per cent. Recently, the rating agency Standard & Poor’s forecast that local property values would dip by 10 per cent through the year, and which could continue into early next year as well. But for certain locations, the decline could be much more severe, by up to 20 per cent, it added.