Today’s oversupply of property is a well-planned strategy to build for the population of tomorrow
In our boardroom in Vision Tower, nestled amongst awards past and present, most recently of course Property Finder’s Largest Lead Generator, you can find a wonderful piece of Dubai property memorabilia. A contract signed in 1989 with Linda Mahoney for an exclusive listing in Jumeirah. Before Form A’s or Form F’s, indeed before any recognizable forms at all, this contract scrawled in pencil, in Arabic, was drawn upon a torn-off piece of cardboard, with Linda’s commission clearly circled at the bottom. It casts you back to a time before the Burj and the Palm, when business was conducted over a shisha and a handshake and it makes you reflect on how far our market has come in a relatively short period of time.
This year, the UAE property market, as we know it, will turn 17 and it has indeed come a long way since that contract was signed. It was in 2002 that freehold properties were introduced and designated areas established where expats and international investors were able to buy. Since then, we have experienced the hype of the newly discovered market place and the lows of a major financial crash. The brokerage has gone from being a pastime of anyone in town with a mobile phone to a well-regulated industry of approximately 6,000 professionals. Some truly incredible feats of engineering have been achieved and nobody in the world now questions Dubai’s place as one of the truly great cities. But our market is still a teenager. Full of opportunity, promise and contradiction, and like all teenagers, the market here can both delight and dismay in equal measures.
It is undoubtedly one of the most exciting and vibrant markets in the world, attracting talent from across the globe, but there are still too many within the industry that are allowed to act in a way that negatively impacts us all. It has embraced technology at a rate of speed unseen in other more mature markets, yet our legal systems have not kept pace to truly allow us to utilize the opportunities of PropTech to the benefit of our customers, especially in the fields of digital signatures and electronic payments. And like all millennials, the market here is obsessed with social media which has helped educate and inform the consumer but has also too often prioritized style over substance. Yes, we all see the badges guys, well done!
Currently, we are experiencing some late adolescent growing pains due to the very real growing pains of a city building for its future. Unlike the overnight price falls of 2008, we are now experiencing the long-drawn-out deflation of value that comes from the gradual erosion of confidence in the face of global uncertainty and overdevelopment. I have no doubt that today’s oversupply of property is a well-planned strategy to build for the population of tomorrow; a population the UAE will need to thrive in a post-carbon world.
The government has taken strong steps to encourage jobs, population, and growth such as visa and company ownership reform and VAT implementation, and who would be against Dubai reaching its target of 5 million residents over the next decade? But in the short term, oversupply has caused prices and transactions to fall, placing strain on investors, confidence, and brokers. I am sure there will be others within these pages extolling the virtues of the opportunities to be found in today’s market, and I would agree with them, but the effect of this challenging market is likely to be further consolidation and contraction of broker numbers in the short-term. But these markets are necessary for the industry itself to continue to grow and mature. It is during tougher times that greater efficiencies are sought and bad practice is weeded out. Brokers and brokerages that have built a strong reputation for service, integrity, and delivery will thrive while those who entered the market to make a quick buck in headier times will rightly struggle. And it is in this market dynamic that as an industry, we need to push on and embrace the three pillars of a mature market: Transparency, Certainty, and Exclusivity.
- Transparency is crucial for confidence for brokers and investors alike; the more transparent a market, the more inward investment it will enjoy. Dubai is now ranked as the 40th most transparent real estate market in the world*, up from 48th the previous year but still just behind Mexico at 39th. A position we should all expect to see improve. There have been welcome initiatives taken such as REST (Real Estate Self Transaction) and the much-anticipated introduction of Blockchain to all transactions which should bring greater transparency to fees, prices, and deals. But investors are demanding greater transparency over escrow and further transparency is also needed especially when it comes to data accuracy. Integrity of data on which purchase decisions are made is crucial to consumer confidence and the Dubai Land Department (DLD) and other key stakeholders in data must continue to work to give the market the assurance of transparency.
- Certainty is also crucial for investors and business owners. As Benjamin Franklin said, “Nothing in this world can be said to be certain except death and taxes”, and of course no market in the world offers certainty of return. Even the most established markets are currently experiencing price corrections, with London down 20 percent since the peak in 2014, Sydney down 16 percent over the last year and Hong Kong has fallen 9 percent in as many months. However, what we should expect is certainty in law and certainty in the actions and decisions of our institutions. The DLD and Real Estate Regulatory Agency (RERA) have done very well in recent years in regulating the market for brokers but inconsistencies over decisions and implementation of policy causes huge frustrations, especially to brokerages striving and investing to make sure they operate within regulations while others seem to operate under a different set of rules.
- Finally, I would call for greater exclusivity in our drive for a more mature market. Exclusive listings are the norm in most mature markets as exclusivity give an opportunity for a broker to truly invest the time and resources needed to do the best job for their client. Likewise, exclusivity creates greater accountability of the broker to their client, the seller. Sadly, in our market, exclusivity remains a minority position for most listings, leading to a distortion of the market, an inflation of perceived supply, frustration to the buyer and tenant and a lack of certainty for the broker. Property Finder and others should be applauded for their attempts to remedy the issue of fake, multiple listings, but it is the responsibility for all of those with a stake in the future of our industry to educate the consumer on the benefits of exclusivity and to work with RERA and the DLD to ensure the Trakheesi system is fit for purpose and policed correctly.
I am a relative newcomer to the market in the UAE. I arrived two years ago after 15 years in estate agency in London but as I told my teams at the time, “People are people and properties have four walls and a roof wherever you are in the world.” This is obviously a simplistic remark and like the Dubai road system, it has taken me a little bit of time to navigate the market, but the most difficult aspects to get to grips with have been lack of transparency, certainty, and exclusivity which I believe hinder investment.
Our late teenager market has many great virtues, throwing a great party with Property Finder for one, but it still has a lot to learn from its counterparts in the UK, Australia, and the US if it is to become a top-five destination for international property investors. But we are firmly on the right track. There is undoubtedly the will within the industry and the DLD to keep moving in the right direction and I am very optimistic for the future.
So, will I be rushing back to the relative comfort of the London market anytime soon? Shall I be swapping the Burj Khalifa for the Shard and once again digging out my raincoat? No chance – I’m having far too much fun reliving my teenage years here in Dubai!
RICHARD WAIND
