A sharp increase in requests for inspections of finished properties over the first quarter of 2015 signals the end of flipping of properties for quick profit in Dubai and gives a strong sign of the real estate market’s slowdown.
We launched this company in 2009 to fulfill the need for a huge spike in inspections, because the market had crashed and people quickly realised they would need to use the properties they had invested in rather than just sell them on for profit.
Since the start of the year, we have been servicing the steady end-user market, where people are still buying properties to live, but it is also clear many investors are giving up the ghost of making profit on sale right now and instead inspecting their vacant villas in order to get them ready to live in or rent out, while they ride the current dip in prices.
There is still a need to drive awareness in the importance of inspections, as most western European expats consider commissioning a professional inspection a standard part of buying or leasing a property. However, we find many residents from other cultures are not used to this stage in the process, which can often save huge expense and future heartache.
There were 5,662 Dubai Land Department real estate unit transactions in the first four months of 2015, compared to 9,655 during the same period last year – a fall of 41% and the lowest number for the first third of the year since 2010.
If more property owners are bunkering in, preparing their investment properties to be lived in for a few years until prices are on the up again, then economics dictates this could signal an increase in supply and potentially a price correction for long suffering renters in the emirate.
Leigh Borg, sales director of Belleview Real Estate agrees the quick purchase and sale of property for profit may have left Dubai for now, and his agency has witnessed rental prices flat line since the final quarter of 2014. “Around 90% of sales handled by our office over the past six months have been to end users. We haven’t seen much in the way of speculating for profit at all in 2015. There was a lot of activity in the off plan market over the last few years, but this has tailed off – particularly since a buyer purchasing an off plan property on the secondary market now pays 10% – Oqood (4%), transfer fee (4%) and agency fee (2%) – plus any premium to the seller and the developer will require up to 40% of the property to be paid before offering an NOC for transfer. These factors make any potential gains from speculation much less attractive compared to the risk involved.
“The Dubai rental market is still very strong but the prices aren’t noticeably rising anymore, which is quite significant considering rents in some areas shot up by 30% in recent years. There’s no upward pressure from landlords, as happened in 2013 and 2014, particularly during the hype over the Expo 2020 announcement in November 2013. Thanks to clear communication by the authorities and consistent reporting by the media, tenants are also a lot more savvy now in terms of the price index, where they know their rights and won’t allow any inflated increases or hike attempts after the three month notice period.”
With property inspections starting from AED1,800, Snag and Inspect is the only inspection company in the UAE certified by the International Association of Certified Home Inspectors.