Weekly Dubai real estate news digest. Issue 52

Concerns at all-time high
Welcome to the fifty-second issue of Market Insight, your weekly guide to what's happening in the Dubai real estate market.
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MARKET INSIGHT. Weekly guide to Dubai's property scene
Issue 52 |  June 29, 2014

Concerns at all-time high

The Dubai Financial Market has been caught in a roller coaster of changes over the past few weeks. Recent news of firings at Arabtec, the UAE's largest listed builder, spurred a new round of panic. Shares in the stock exchange fell 6.7% to 4,009.01, leaving them down 25% from their May peak. It was the end of a long bull market. 

Arabtec, the Dubai company that built the Burj Khalifa, has a stake high-profile projects worldwide, and has lost more than AED16 billion in market value in the past few weeks. The construction giant is thought to have fired its chief operating officer, chief information officer among other senior staffers since the resignation last week of Hasan Ismaik, its chief executive. 

However, most analysts were reluctant to comment on whether this slump is permanent. "There was ridiculous exaggeration of the value of Arabtec on the upside, and we have no reason to think there won't be a ridiculous exaggeration on the downside," said Loic Pelichet of NBK Capital. 

In the past year, Dubai's economy has picked up steam and is expected to grow by about 5% this year, according to the IMF. The realty sector has also rebounded strongly since early 2013. Analysts at London-based Capital Economics said the recent stock market selloff wasn't necessarily an echo of Dubai's previous crisis. "We would be wary of drawing too many parallels with the situation back then," they said. Authorities in Dubai have moved to curb speculation in the local property market, raising transaction fees and introducing mortgage caps.

Demand still seems rampant as well, especially in the off-plan market. The Danube Group's first venture into real estate development, a cluster of 171 town houses in the Al Furjan community being built for AED500 million, was sold out on the first day itself. Also, while prices of Dubai's prime residential property grew by just 1% quarter-on-quarter in the first three months of 2014, it is not the end of the bull run, according to global consultancy Knight Frank. In its latest report, it noted that Dubai's residential prices will resume on an upward path in the second half of this year.

Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. While concerns have been mounting amidst Arabtec's falling shares, most experts agree that it is difficult to predict what this means for the sector in general. Most also point out that there is now a need for new disclosure rules as the Arabtec rout dragged the Dubai Financial Market into bear territory. It definitely appears that transparency is key, moving forward, and it seems like the UAE is on its way there with being the most transparent market in the region. 


Pashma Manglani


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Luxury property values see contraction

Dubai's upscale properties are no longer growing in value. In fact, the pace of growth may have dropped to an anaemic 1% int he first three months of the year, compared with an average of % quarterly growth in 2013, according to Knight Frank, the consultancy.

Things haven't gotten any better since the second quarter, based on initial transactional data. If this is the case, the golden run that Dubai's premium homes have been through for the better part of 2012 and 2013 has come to a close. Key locations such as the Palm, Dubai Marina and Downtown had all benefited from the sustained upswing in demand during this phase, and which led to a skyrocketing of values.

It could be that cash-ready investors, who are the trendsetters in the premium end of the local market, could be taking a breather. Or, the may have concerns that asking prices had shot way too high for them to realise the hoped for yields.

Either way, the current narrow growth rate would be a welcome respite for the broader marketplace, as it comes amid growing concerns that it was in clear danger of overheating. The chill in recent transactional activity, however, has hit mortgage buyers, more so after the Central Bank's higher down payment requirements started to bite deep since last December.  


Read more on Gulf News

Arabtec meltdown shakes market

The recent selloff in Dubai's stock market gathered pace last week, hastened by concerns about one of the Middle East's biggest construction companies.

The benchmark DFM index finished about 6.7% lower on Tuesday and has now lost 25% in a little over six weeks. Arabtec Holding PJSC's shares fell nearly 10%.

UAE equity analysts refused to predict how much damage would be done to Arabtec's share price, after another day on which its shares closed limit-down, effectively washing their hands of the builder's prospects.

 Arabtec's loss has been AED1.4 billion of its value and trading was halted as per UAE regulations that prevent trading in a company that has lost 10% of its value. 

"It is too early to see where Arabtec's share price will end up," said Sanyalaksna Manibhandu, the head of research at NBAD. "The range has varied from AED1.45 to AED7.40 per share across 12 months."


Read more on The National

Rent-to-own option needed

People from various parts of the world eye UAE as the place to make a new beginning and there are plenty genuine buyers, who are ready to spend a considerable amount of time in this country. 

For expats who have been living here for years now, buying property seems an impossible feat with the current mortgage cap restrictions. 

According to Robin Teh, country manager, Chesterton International, the solution is simple: bring back the rent-to-own schemes that were there in the past. He points out that these schemes offer an attractive solution to potential investors and sellers alike. They can also be adopted in good times, for projects that target middle-income expatriates. 


Read more on Gulf News

Dubai 'most transparent' market in region 

Dubai retained its status as the most "transparent" regional property market for global investors, but the biggest improvement has been for Qatar, according to the Global Real Estate Transparency Index for 2014, released by the consultancy JLL.

Dubai ranked 49th in the JLL findings while Abu Dhabi was 53rd. These scores placed the list of countries rated as being 'semi-transparent,' while the UK, US and Australia were the top three ranked countries. 

The transparency parameter determines how an investor with substantial funds at his disposal assesses the ease of an entry into - and exit from - a particular market. 


Read more on Gulf News

Dubizzle launches realty advice website

Residents in Dubai facing eviction or unfair rent increases will now be able to get a clearer picture of their rights, thanks to a new online property advice service.

Dubizzle, the Dubai-based classifieds website, is launching knowyourrights.dubizzle.com to allow people to have queries answered by a lawyer specialising in real estate.

The site will act as a centralised resource for people who are unclear as to how the law affects them in rental or sale disputes.

"Individuals do have rights in this market," said Barry Judge, UAE general manager, Dubizzle. "Perhaps, sometimes, there's not enough transparency over what those rights are. This service ensures that individuals have full visibility and that there is equity in the marketplace."

"It's the consolidation of all that information into a single platform that will make it easier for people if they come to a dispute."


Read more on The National

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