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Credit rating agency Standard & Poor’s, recently issued a warning that a number of Dubai’s biggest companies will need State-funded bailouts in 2012 if large-scale defaults are to be avoided. The concern is that fi ve conglomerates, including Dubai’s fi nancial services zone’s investment arm and the main electricity and water company, will struggle to service their vast debt piles alone. The property market remains equally bleak,


with residential property values having fallen by 60 per cent since the peak in late 2008. According to analysts, property prices are expected to stop falling during 2012, however oversupply is a real issue; 18,000 new homes were brought to market in 2011 when thousands of expats left the country. The government retains the freehold rights to the land and in the majority of cases only locals can own freehold, so the majority of property is leased rather than purchased. But it’s not all bad news. Businesses and


expatriates working in the UAE, who are now calling themselves the survivors of the recession, are starting to see signs of a recovery. Companies are starting to recruit again, construction projects are resuming, so foreign workers are returning. Evidence of this is fairly widespread. Recently, the Abu Dhabi government announced that it will go ahead with the building of the Louvre, Guggenheim and Zayed National museums after having shelved the $27bn [£17bn] project for the last few years. A commitment has been also been made to build more than 10,000 new homes across Abu Dhabi and Dubai. The tensions with Iran and potential


problems with access to the Straits of Hormuz may also benefi t the UAE, as it is currently putting the fi nishing touches to an oil pipeline, which directly links the Abu Dhabi oil fi elds to Fujairah on the Gulf of Oman, bypassing the Straits of Hormuz all together. It is a link that could become vital to the whole Gulf region. Ultimately, in this world of uncertainty, the


Gulf has an advantage that can always be used as a crutch in leaner times: the area has 30 per cent of the world’s oil reserves available to it, and the price of oil continues to rise. This, coupled with the vision of the UAE government to create and sustain a global hub between the East and West along with a classy tourist destination, should help see the area recover and grow. When you consider the UAE is only 40 years-old, the future looks fairly bright in the medium to long term.


PROPERTY


If you are wondering what the property market is like in the UAE, and whether there is a gap in the market for a passionate and entrepreneurial estate agent, my personal house and offi ce hunting experience over the past six months should give you an insight. Searching for a property in the UAE


consists of three main strategies: telling everyone you know you are looking, and to


www.the-negotiator.co.uk


A smart villa and a sunset to die for. This is Dubai!


let you know of acquaintances who are


vacating properties; browsing the unsophisticated property websites and undeveloped property portals, of which Dubizzle is the most used;


driving around the areas you are interested in, stopping at the To Let signs, calling the agent on the board, or even just walking around the house, as they are typically left open.


Dubai is more akin to a UK county, than


a city, so the fi rst decision for my wife and daughters and I in looking for a house or offi ce was to decide on which area of Dubai. There is a huge diff erence between the older parts, like Satwa and Bur Dubai, when compared to the newer Marina area or the low rise beach side locations, including Jumeirah and Umm Suqeim. Having settled on living around Jumeirah,


Dubai


particularly help our viewing task. We fi nally met an agent, Mr Senthill from Open Source Real Estate, who, with several years’ experience in Dubai, we found very helpful. He met us, drove us around and explained how everything worked; just what we wanted. We viewed a handful of properties, fi nally deciding on the perfect villa, close to the beach on a compound with a pool. However, now came the part where we had to commit to the contracts, which diff ers drastically to the UK. You commit to an annual contract and hand over post-dated cheques for the whole year. Dependent on the landlord, this could be payable in a single cheque or quarterly.


A hefty security deposit was also paid, along


with a compulsory fi ve per cent commission. Interestingly, you would still pay the


commission if you went direct to the landlord and didn’t use an agent.


The agency market here is somewhere


between the UK and US models. Any agent can let any available house, and the landlords are likely to accept off ers from agents they’ve never met, or even directly from tenants. Commissions are split 50/50 with the agents, who then receive no further income from the property. Management contracts don’t tend to exist because most landlords are commercial entities with their own maintenance companies, to whom tenants have direct access for any issues.


“In Dubai, any agent can let any available house and the landlords are likely to accept off ers from agents they’ve never met – or even directly


from tenants.” Chris Haines, Group Managing Director, Evolvin


within a 15 minute drive of schools and easy access to the highways and beaches, we scoured the websites for available properties. We soon discovered something of an anomaly; fi rst glance suggested there was a large supply of property, but investigations highlighted that the properties had all been listed by at least fi ve agents, and in fact there were only a few available properties within our area and price bracket.


AGENCY


Over the next few days we spoke to several of agents to arrange viewings, but were rather disappointed in the lack of enthusiasm displayed. A few agents didn’t want to leave their offi ces, and were unable to give directions to the properties, which didn’t


There are some well-known agency brands here, including Hamptons International, Cluttons and Jones LaSalle, but their infl uence seems negligible unless you are looking at the very high end, multi-million dirham properties. There are also a very small number of UK-style agents, such as Betterhomes, who seem to have prospered by bringing high class marketing, functionally-rich websites and English speaking agents to the market. They are living proof of the opportunity for sharp residential estate agents in the UAE market, although adaptation to the environment is crucial, as this is certainly not like home.


Chris Haines is Group Managing Director of Evolvin. ●


TheNegotiator ● June 2012 ● 21


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