Buying suppport returning for Dubai and Abu Dhabi properties

Austin News.Net
Saturday 3rd October, 2009

The UAE property boom may have cooled for a while but there are many bargains to be had in the meantime.

Prices of apartments, villas, and commercial suites, and entire buildings are up for grabs at depressed prices.

On the whole prices have fallen more than 40% since their September peak last year. Glitzy developments on Palm Jumeirah, Dubai Marina, and in Abu Dhabi have left stretched buyers out on a limb.

Many of the properties are still under construction, or yet to commence, yet buyers are contracted to instalment payments.

Many developers have provided relief by restructuring payments, or allowing buyers of multiple units to consolidate their purchases.

A secondary market has also been established after some developers issued credits for properties that have yet to commence construction. On this basis buyers can trade their interest in a dormant project for an interest in an existing property, or one where construction is already underway.

On Saturday a US-based developer and investor Hines Interests said it was establishing a fund to buy up properties in the emirates. The distressed asset fund will have buying power of more than $1 billion from equity and borrowings to buy up discounted properties from distressed owners.

The fund is not on its own though. A number of buyers from countries like Saudi Arabia, Iran, and Russia have stepped in over recent months instructing agents to alert them to "bargains." At first all properties were slow to move, however in recent months demand for bargain-priced property has mushroomed. This at a time when most forced sellers have already bailed out. Now owners are hanging on for a two-or-three year term to when prices may resume their upward spiral. Rents have also now stabilised enabling owners to lock in returns two or three percent above their funding costs. Local banks too have begun lending again, although the criteria is much tighter.

Real estate agents are quietly confident the bottom is in and the market will consolidate for a period before rising in the first quarter of next year.

Significant construction however is still ongoing which will keep a lid on the extent of rises for at least the next two years.

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