The state of the global economy is making some potential property buyers nervous. Which is why brokers must work hard to explain the benefits of positive new policies in Dubai.
Positive Initiatives from The Government
There have been numerous informative press reports over the last six months related to the state of the Dubai real estate market – in particular the gradual downturn in prices and transactions over recent years.
This has resulted in some very positive initiatives by the government to incentivise potential buyers, some attractive offers by major developers, financiers being more creative, and brokers adopting a more effective business model.
Rather than repeating most of this well-informed commentary, I want to look at things from a slightly different perspective so that all parties – government, developers, financiers, brokers and buyers – may take a more balanced view.
The first factor, which has a significant impact on this equation is the general state of the world economy. Over the past year or two we have witnessed a situation of deteriorating economic confidence brought about by a wide range of factors: trade disruption, shifts in national competitiveness, and regional conflict – to name just a few.
The general lack of economic confidence equates to potential buyers being unsure, wanting to re-assess needs and priorities, and in some cases lowering their aspirations. It is generally accepted that this is the underlying reason for the downturn in the Dubai real estate market. This atmosphere does, of course, need to be counterbalanced by making this market more attractive.
The government has already announced initiatives that will remove some of the constraints in the market, and the recent move to allow expatriates to qualify for a new ten-year resident visa will certainly help generate more interest in property. Most prospective clients are, however, wanting to know the details on this and we are advising them that more clarification is expected from the government later this year.
The government announcement about investors being able to own 100% of UAE-based companies has also been quite significant, as we have been responding to potential clients who, again, see the advantages of matters being streamlined. Many foreign investors and business partners view this development as very positive as they will not need to find sponsors.
The government has already announced initiatives that will remove some of the constraints in the market, and the recent move to allow expatriates to qualify for a new ten-year resident visa will certainly help generate more interest in property.
The new visa rules are expected to change some of the dynamics of Dubai because it has the potential to offer people more security of tenure. The ‘feel good’ factor always has an impact on property demand and these initiatives will, in my opinion, be positive. In my 18 years of experience, potential property buyers have always been interested in the ability to come and go as they wish and have residency visas with a longer validity.
Positive Signs from Financiers
Financiers have also responded positively, supported by the government. We are pleased to see lenders in the market offering a range of incentives that include:
- Reduction in the interest rate for final payments on handover
- Valuations based on the original Sales & Purchase Agreement price
- DLD/agent fees added to the mortgage
- Reduced/zero processing fee
- Free property insurance year one
- Reduction of in-house life insurance premiums
- Free valuation
But the one change we are all waiting for is the reduction in the LTV (Loan to Value) requirements. First-time buyers won’t struggle to make the monthly repayments but it’s usually one step too far to find the 25% down payment, together with the associated fees.
The other issue related to financing an acquisition is the role played by foreign exchange fluctuations. Against the background of some significant shifts in exchange rates associated with a range of impacts, potential overseas buyers can see a significant potential saving in the cost of acquisition. There is evidence that this is having a significant effect on the
market.
The major developers are certainly playing their part in stimulating the market with wide based incentives including:
- 5-year free finance
- 5-year property management
- DLD fee waiver
- Zero service fees
- Post-handover payment plan
Buyer’s Concerns
All of these incentives are very positive but there are two issues related to buyer sentiment that various parties need to recognise. The first matter is that some of the announced incentives still need to be detailed, and in turn explained carefully by buyer lawyers and brokers. This requires a “steady state” – clear and unequivocal regulations and conditions that are not questionable in the mind of the buyer. This places a great responsibility on us as brokers to be able to interpret and convey the meaning, impacts and advantages of these new regulations and conditions across all languages and cultures.
The second matter is one of security and financial stability over which we as industry partners have much less control. The government does, however, emphasises the security and financial stability that the potential property buyer in Dubai requires.
In my eighteen years in the Dubai real estate brokerage business, there is one matter that still impacts buyer sentiment. After a perfect property/home/investment has been found and everything has been explained to the prospective buyer you can almost hear them thinking “I’m unsure, maybe we could get more clarity on the visa situation, maybe the exchange rate will shift more in my favour and maybe I can buy at a better price.”
In order to overcome these final doubts, it is time for all stakeholders in the industry to adopt more of this “steady state” approach I mentioned. Based on my experience this will incentivise buyers more and will naturally stimulate our market, as we all take a more unified positive and stable approach and attitude.
Judging whether to buy or to wait is about judging the state of the market, and although the state of the Dubai market is undoubtedly positive we all have a joint responsibility to get this message out clearly – locally and internationally.
Within Exclusive Links Real Estate Brokers we are experiencing an upturn in enquiries, but to continue converting them into sales we must maintain conditions where buyers support our view, that this is the best possible time to make a real estate purchase in Dubai.
Dubai is a unique investment opportunity that offers a wide range of incentives, stability, safety – and is simply a lovely place to live.
Ultimately it is all about remaining competitive and building on varied and trusted revenue streams. It is about brands thinking outside the box and creating a space that is a worthwhile customer experience.
ZARAH EVANS
Managing Partner and Owner
Exclusive Links Real Estate
Connect with Zarah Evans on LinkdIn
How many years’ experience do you have in real estate & market specialty?
18 years as a market professional specialising in boutique and bespoke brokerage including sales, leasing, commercial and property management.
Your article focuses on brokers, and why they should work hard to explain the benefits of positive new policies in Dubai. Why’s that?
I felt it was time for all stakeholders to be more consistent in their message to stimulate buyer sentiment. Create a more ‘steady state’ feel good factor.
In just a few words, describe the UAE real estate market in 2019
The market clean up of brokers and listings will continue with more focus on quality rather than quantity. More automation and tightening of systems and processes and of course a year closer to Expo will bring another interesting, exciting and rewarding few months ahead.
This article was originally published in Trends Report, Vol 5.
