Note to serious property sellers: Keep it real
Homeowners must put up realistic asking prices to compete with developers’ off-plan units
“Over the last couple of years, money flows have become skewed towards off-plan developments in the ratio of 2:1, which historically has been 1:1. A year-on-year [January-November] comparison of activity reveals a 35 per cent increase in transactions [ready and off-plan]. However, the bulk of the increase can be attributed to the off-plan market with a 64 per cent rise, while the ready market incurred a marginal increase of three per cent. The combination of lower prices, extended payment plans and entry into developing areas has forced investors to take opportunistic bets in the off-plan market compared to the plain vanilla options in the ready space,” says Hussain Alladin, head of IR and research at Global Capital Partners.
An interesting trend to note is that while investors typically opt for off-plan properties, end-users are increasingly getting into this space as well.
“End-users are entering this market and are prepared to wait for the properties. That being said, there is a lot a secondary market unit can offer that an off-plan one can’t. If a seller is serious to sell, there are buyers out there and still a lot of transactions happening. Following the activity in Q4 2017, I expect the secondary market to do well in 2018,” explains Lewis Allsopp, CEO, Allsopp & Allsopp.
Market commentators cite several instances where sellers are getting offers nowhere near their asking prices. According to GCP, there is a 11 per cent differential between transacted and listed prices on a city-wide scale. This mostly implies that sellers have not adjusted prices.
“It all depends what price a property comes to the market at. What we try to do before a property comes to the market is to discuss with the owner the current market, recent transactions, trends, competition, etc., and bring the property to the market at a price which will be attractive enough to gain interest and give a small space for negotiation. Ultimately, if a seller has to give a big discount, then they have brought the property to the market at an incorrect pricing level in the first place,” observes Allsopp.
However, there have been transactions taking place in the secondary market and a rise in mortgage activity in this space as well. This implies that more tenants could be taking up mortgages to turn into owner-occupiers.
“The continued fall in city-wide ready prices, although green shoots have begun to appear in certain communities, will lessen the gap between ready and off-plan prices, causing investors to refocus their intentions in scouting value in the ready market. A trend we believe will play out over the next couple of years, causing the ratio of sales between ready to off-plan to mean revert to its historical averages,” adds Alladin.
Sellers are being advised to be patient if they wish to capitalise on the upswing that could be on the horizon. “An increase in government spending, a rise in oil prices and the catalyst of the World Expo 2020 sets the stage for an economic boom in the coming years,” reckons Alladin.
Although off-plan holds appeal owing to the newness of the product and attractive payment plans, a secondary market unit too has a lot of advantages.
“It is ready to move into, most of the time is in an established community, it’s financeable up to the central bank regulations, which depending on the sales price can be up to 75 per cent LTV [an off-plan unit is 50 per cent], and you can actually see what you are buying. Secondary market buyers are mostly people who are currently renting and looking to get onto the property ladder, people living with family and looking to buy their first home and there are also plenty of clients who want to either up or downsize,” informs Allsopp.
Sellers will do well to keep the property they wish to sell vacant. This is one of the primary things a buyer will look for once they have decided on the right property type and area.
“If an owner has their property rented out, this can be a difficult proposition for them as they will have to cover the mortgage while the property is vacant, but the overwhelming fact is that a vacant on transfer property sells quicker and for a higher price, so it’s worth the short-term pain. If it’s not vacant, then there should be a vacation notice in place, so there is a definite timeframe for the tenants leaving. After this, it’s just the usual – make sure the property is well-presented, de-cluttered, etc., and make sure it’s always available for viewings,” suggests Allsopp.
According to Allsopp & Allsopp, the average sales price in Dubai last year was just over Dh2.5 million. Properties listed in the secondary market in the price range of Dh1 million saw the greatest sales activity.
credits: Khaleej Times