May 01 2011
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Dubai real estate market witnesses a significant drop in cash buyers
The number of cash buyers in Dubai has reduced significantly as the market now driven by end users and home finance being readily available, according to experts.
"The market is now being dominated by end users rather than speculators. This is coupled with the fact that finance is now more readily available from banks at attractive rates. So I assume that the number of cash purchasers in the market has reduced," Gregory Antioch, Head of Residential Sales, Cluttons Dubai, told Emirates 24|7.
"However, against this view, investors from trouble hit areas around the region such as Bahrain, Egypt and Syria may be wanting to take their cash out of these countries and deposit them in real estate here in Dubai."
According to Will Jones, Dubai Sales & Leasing Director, Elysian Real Estate, majority of buyers and investors are showing a mixed trend of choosing to pay cash or applying for mortgages.
"The phrase 'cash is king' still holds sway in Dubai as being the forefront for buyers and brokers alone to start negotiations with 'the interested party is a cash buyer.' However, this does not always result in a deal being conducted and concluded quickly, with many different factors holding up transactions throughout the process."
In 2008 and 2009, majority of the transactions in Dubai were done by cash buyers. HC Securities in a report released in March 2010 said that 85 per cent of the total transaction in February 2010 were done by cash buyers.
Earlier this month, UAE Central Bank statistics revealed that real estate mortgage loans had increased by over 15 per cent in 2010. Bank mortgages in the UAE rose by Dh21.47 billion last year, from Dh141.71b at the end of 2009 to Dh163.19 billion at the end of 2010. By comparison, mortgages rose Dh15.88 billion, or 12.6 per cent, in 2009, albeit lower than the 123 per cent rise in 2008 and a 100 per cent increase in 2007.
Interestingly, the last three transaction closed by Cluttons were all cash buyers while Elysian too has closed a number of cash deals this year.
Antioch said: "They are still some around and still active in the market." Jones added: "As we have a lot of interest from overseas investors and individuals due to our ever growing international presence. The transactions we do conclude however with mortgage buyers are as pretty straight forward as our cash deals, making sure we work with proficient mortgage companies providing the best and quickest service to our clients."
Asked if cash buyers offered "huge" discounts, Cluttons said cash buyers may get a nominal discount and nothing more. "Like everything it all comes down to negotiation and I would suppose the less marketable the property is and the longer it has been on the mark, the bigger the potential discount for cash there may be."
Jones reckoned that he market has now platued off and showing signs of being stability.
"The amount of discount is not substantial enough to make a huge difference, except for some exceptions in regards to individuals moving from the country or still in need to release capital from theirinvestments. Due to the current market situation, pricing and available units, owners and sellers are tending to hold out for the market price, slightly reluctant to accept a quick cash deal for a price reduction."
Baig ruled out the possibility of cash buyers getting any discount, adding: "It does not make any difference... the price remains the same."
© Emirates 24|7 2011
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