E&T Valuations - October Property Basket

Welcome to the Edwards and Towers Monthly Property Basket. We have selected 8 apartments and 8 villas which are trading frequently in the Dubai marketplace, and have been tracking their values since the start of 2013 as part of the operations of our RICS-qualified Valuation Department.

Each month we will release a new Property Basket with the latest prices, and the percentage changes. The values in the basket are based on actual transactions we have witnessed, and not list prices (which can sometimes be distorted).

Apartments

The residential market in Dubai underwent significant changes during the month of October. The introduction of the 4% transfer fee has imposed a notable restriction on buyers, who are typically being made to pay the full 4% despite the Government guidelines. Additionally, the announcement of the 75% mortgage cap from December 1^st will further increase the initial capital requirements for mortgaged buyers. Already, this has had a negative impact on transaction volumes of certain sections of the markets, specifically the higher-priced properties.

Another notable impact throughout October has been the looming Expo 2020 decision. Ironically, this has had a negative impact on the market because sellers have raised their prices significantly beyond current market levels in the expectation that prices will rise following a successful Dubai bid. However, we anticipate that the impact of a decision either way will have a minimal impact as the event is 7 years away.

As apartments are generally lower in terms of capital required, they have continued to transact at a reasonable rate. One of the most notable patterns emerging is that there has been more of an improvement in properties at the lower end of the price spectrum, which we anticipate is because of the increased transfer fee. The Greens has witnessed the most activity from the basket, as affordability is increasingly becoming the most important factor in the apartment market.

Villas

Activity in the villa segment was notably more subdued than the apartments, primarily because of the higher capital lot size required. First time mortgaged buyers, even for a villa of AED 2,000,000, will have to find AED 500,000 deposit, AED 80,000 transfer fee and AED 40,000 agency fee to enter the market as of December 1^st. This upfront cash requirement of AED 620,000 is simply too much for many young buyers looking to enter the market for the first time.

Additionally, the mortgage cap regulation stipulates that for properties over AED 5,000,000 the LTV will be capped at 65% for expats. This will again increase the capital required for villas in some of the more popular expat areas such as Arabian Ranches and Victory Heights, where the average price is above this level.

Overall, the properties surveyed in the basket remained flat, and the growth since the start of the year is now at a similar level to the apartments as the lower end of the market begins to catch up in terms of growth. The sellers of Garden Homes on the Palm Jumeirah are becoming increasingly ambitious with their price expectations, and volumes here have suffered as a result. At the other end of the market, however, there is still some activity with townhouses where entry levels are lower.

For more details, or to request a copy of the latest research note, contact our Director Simon Kennedy on simon@edwardsandtowers.com or +971504515226.

www.edwardsandtowers.com/valuations

Dubai Transfer fees

Dubai Land Department Transfer Fees to change again???

The new transfer fee of 4% has now been running for the past 3 weeks and it seems to be coming accepted by the property fraternity that the buyer will pay the full amount.

This was confirmed at my last transfer on Thursday when the transfer office actually refused to give 2 receipts for the 4% split 2% and 2% for the buyer and seller. One receipt for 4% to either the buyer or seller is all they will produce.

There is also a rumour floating around that there is going to be another change to the transfer fees...

Now that the 4% transfer fee has been accepted the DLD look like they might introduce a fee specifically for off plan sales in Dubai.

The speculation is anticipating a 9% transfer fee for off plan sales in Dubai and 4% for completed property.

This would be a dramatic change to a market that was only charging 2% 4 weeks ago and some will think that it will dampen the market too much.

I am not convinced it will dampen the market like people think but I do think it could influence the profile of buyers that are active.

I won't bang on too much  but my little theory runs like this.

If you take a recent Emaar launch in Downtown we all remember the mega queues and scuffling that took place to get a ticket. As agents we also know that a lot of the tickets were sold to agents who hustle and do anything required to get to the front of the queue so that they can get a ticket to either sell on or put a deposit down with the intention of immediately selling at a profit/premium. It's only a guess but I would think that at least half of all off plan launch sales are sold to a second buyer at a premium within 4 weeks. These second string buyers then keep the property until completion.If you could stop the brokers and hardcore flippers from getting to the front of the queue then in theory you may get a much larger percentage of genuine buyers putting deposits down at launch and holding until completion.

If done correctly the 9% transfer will stop 'some' people/agents from even bothering to stand in line and fight like WWE wrestlers for a ticket.What the DLD need to understand is that some developers will allow the first buyer who puts down a deposit to  change the name of the buyer to a nominee which actually defeats the object the DLD are trying to achieve. In this instance the agents would still turn up as they know they can change the name on the contract before the DLD would charge the 9%. I would advocate a large fine to the developer who participates in this practice. It currently happens on nearly every launch.

We are definitely going through a period of change in the property market and as it evolves to the next level of maturity I hope the new regulations, whatever they may be, have the desired effect and close all potential loopholes ensuring that right people have a chance to purchase at the beginning of the cycle.