23 April 2009
Regulations must be set by the UAE Government that will ensure funds given by the Central Bank to local banks and lending institutions are earmarked.
"Liquidity has come into the system but it is now being held by the banks. It is good to have government stimulus but the stimulus needs to come with directives," said Blair Hagkull, Chief Executive, Jones Lang Lasalle.
The experts also called for interest rates on mortgages to come down.
"Interest rates are significantly higher than most international markets. High interest rates coupled with high regulations will make it harder for people to buy into the market," said Hagkull.
He also said that it would be difficult to standardise mortgage interest rates in the UAE. "However, regulations need to come into force that will ensure that funding from Central Bank into lending banks and institutions get earmarked," said Hagkull.
Meanwhile, Elaine Jones, Chief Executive, Asteco, said: "It is important for the government to set tight lending criteria as otherwise we will have the case of the sub-prime issue that we have seen in the West."
Accurate information, positive sentiment, transparency and improved liquidity will get the real estate sector moving again, a panel of experts said yesterday.
"The most important element today is information sharing, especially after the global crisis," said Sheikh Khaled bin Zayed Al Nehyan, Chairman, Tamweel.
"There is a lot of limited information in the market and the common man needs to be able to distinguish between facts and irrelevant information that is not useful and which tends to cause complications in this environment.
"In the past six months to one year there has been so much confusion created in the market. Now is the time to correct this."
Sheikh Khaled was speaking on the sidelines of a round-table gathering organised by Dubai Property Society, an association for professionals working in the real estate sector. The event was described as an in-depth review of the Dubai real estate market.
Jones said: "The biggest problem today is shortage of cash. Cash is important in order to buy property and its increased availability will help reinstate confidence in the market. There are end-users who are willing to buy in the market. However, until mortgages are available and interest rates fall there is no way that buying will return to sustainable levels."
Hagkull said: "The key factor for a buyer today is to buy well and at the right price in order to be well set for the next 10 years. We have been used to seeing real estate as a short-term commodity investment but it is different now."
Naaman Atallah, COO, Emaar Properties, said sufficient demand had to be created to revive the real estate market. "There must be a plan to reverse the population decrease as the real estate sector depends on demand creation. This in the long term will enhance the sector and make it sustainable."
Al Nehyan said Tamweel would start lending again soon. "It could be within weeks, not months," he said. "Tamweel and Amlak will be back in business very soon. We are only waiting for some formalities to be finalised at the federal level."
Rory O'Connor, Director of Real Estate, Arenco, said: "The government should set interest rates for mortgage lending in line with international markets. Whatever the norms are for interest rates in the international markets we should have here as well."
Hagkull added: "There is less risk in the market today in the second quarter of 2009 than there was in the second quarter of last year. Today practically all the speculators are out of the market and only end-users are left. It is a good time for banks and lending institutions to drop interest rates."
Hagkull said rental yields in the UAE were stronger than those in other markets. "Essentially here the rental income from properties bought today are likely to be higher than in most other markets and that will continue to attract investors into the region. The fundamentals of existing products in Dubai are much stronger than in other markets.
"The market here has always been driven by rentals. However, with affordable prices coming into play investors will be keen to buy."
Adel Lootah, Executive Director, the Dubai Property Society, said there had been cases of either too much lending or lending too less, and added: "Institutions need to get the balance back into the market for sustainable lending. What we probably need to go to is a sustainable level for prices and interest rates."
Lootah said this was the best time to introduce mature regulations into the banking sector and called for the standardising of terms and conditions in lending.
"Banks today have different criteria for interest rates despite the Eibor being low."
The experts said consistent regulations should be introduced in the real estate sector in a way that did not affect market sentiment.
Peter Crogan, CEO, BCS Strata Management Services, said: "Issues with respect to the tenure of the work contracts of expatriates tend to cause instability in the market."
They urged the Federal Government to pass new visa regulations that have been drawn up for the real estate sector as this would boost confidence in the market.
Hagkull said: "Sentiment can be raised through the issuing of visas."
Atallah said: "Emaar is revisiting some of its strategies and policies in light of the slowdown in the real estate sector.
"We don't generally make a lot of noise about our policies but we recently adopted a strategy to clean up our toxic assets. We have identified our toxic assets, categorised them and we are taking decisions about some of those assets. "Emaar has not given any 100 per cent refunds to buyers. Instead we are giving credit notes that will allow buyers to swap their properties for others.
"Emaar has issued credit notes to its investors for projects that are not proceeding and have been put on hold. If an investor has bought a unit in a project where building has not started we allow the buyer to switch his investment to another property because we have incurred expenses on the property.
"We are taking everybody's concerns and considerations into account and are willing to offer multiple choices to our investors that will enable them to switch to other investments. This is having a big impact on us."
He said Emaar did not have much of an inventory, adding: "We always relied on pre-selling buildings, which ensured that by the time a building was completed all our units were sold. Emaar is facilitating visa applications for buyers who have the visa clause in their contracts. We cannot guarantee a visa will be issued, however."
Hagkull said the government should prioritise its investments and stay focused on completing projects that had been started.
"For the long-term stability of the real estate sector the projects that have been launched must be completed," he added. "The activities of the developers truly need to be focused."
Mohammed Nimer, Chief Executive of MAG Group, said: "Developers should have in hand not less than 30 per cent of the whole cost of land and construction," he added. "That is the minimum a developer needs to put in and he has to review his financial model very carefully as he cannot rely on making money out of off-plan sales. Unless the developer is professional he cannot survive in the market today."
Lisa Dale, a partner at Al Tamimi, said regulation was a key factor in the market but over-regulation could cause problems.
"Regulation will have to be consistent," she said. "Also we have seen that some of laws, such as law No13, and the way they are written is very simplistic. More clarity in the laws would stabilise the market further.
"Right now Article 11 of Law No13 is being amended, but we think Article 3 also needs to be looked at immediately."
Regulations must be set by the UAE Government that will ensure funds given by the Central Bank to local banks and lending institutions are earmarked.
"Liquidity has come into the system but it is now being held by the banks. It is good to have government stimulus but the stimulus needs to come with directives," said Blair Hagkull, Chief Executive, Jones Lang Lasalle.
The experts also called for interest rates on mortgages to come down.
"Interest rates are significantly higher than most international markets. High interest rates coupled with high regulations will make it harder for people to buy into the market," said Hagkull.
He also said that it would be difficult to standardise mortgage interest rates in the UAE. "However, regulations need to come into force that will ensure that funding from Central Bank into lending banks and institutions get earmarked," said Hagkull.
Meanwhile, Elaine Jones, Chief Executive, Asteco, said: "It is important for the government to set tight lending criteria as otherwise we will have the case of the sub-prime issue that we have seen in the West."
Accurate information, positive sentiment, transparency and improved liquidity will get the real estate sector moving again, a panel of experts said yesterday.
"The most important element today is information sharing, especially after the global crisis," said Sheikh Khaled bin Zayed Al Nehyan, Chairman, Tamweel.
"There is a lot of limited information in the market and the common man needs to be able to distinguish between facts and irrelevant information that is not useful and which tends to cause complications in this environment.
"In the past six months to one year there has been so much confusion created in the market. Now is the time to correct this."
Sheikh Khaled was speaking on the sidelines of a round-table gathering organised by Dubai Property Society, an association for professionals working in the real estate sector. The event was described as an in-depth review of the Dubai real estate market.
Jones said: "The biggest problem today is shortage of cash. Cash is important in order to buy property and its increased availability will help reinstate confidence in the market. There are end-users who are willing to buy in the market. However, until mortgages are available and interest rates fall there is no way that buying will return to sustainable levels."
Hagkull said: "The key factor for a buyer today is to buy well and at the right price in order to be well set for the next 10 years. We have been used to seeing real estate as a short-term commodity investment but it is different now."
Naaman Atallah, COO, Emaar Properties, said sufficient demand had to be created to revive the real estate market. "There must be a plan to reverse the population decrease as the real estate sector depends on demand creation. This in the long term will enhance the sector and make it sustainable."
Al Nehyan said Tamweel would start lending again soon. "It could be within weeks, not months," he said. "Tamweel and Amlak will be back in business very soon. We are only waiting for some formalities to be finalised at the federal level."
Rory O'Connor, Director of Real Estate, Arenco, said: "The government should set interest rates for mortgage lending in line with international markets. Whatever the norms are for interest rates in the international markets we should have here as well."
Hagkull added: "There is less risk in the market today in the second quarter of 2009 than there was in the second quarter of last year. Today practically all the speculators are out of the market and only end-users are left. It is a good time for banks and lending institutions to drop interest rates."
Hagkull said rental yields in the UAE were stronger than those in other markets. "Essentially here the rental income from properties bought today are likely to be higher than in most other markets and that will continue to attract investors into the region. The fundamentals of existing products in Dubai are much stronger than in other markets.
"The market here has always been driven by rentals. However, with affordable prices coming into play investors will be keen to buy."
Adel Lootah, Executive Director, the Dubai Property Society, said there had been cases of either too much lending or lending too less, and added: "Institutions need to get the balance back into the market for sustainable lending. What we probably need to go to is a sustainable level for prices and interest rates."
Lootah said this was the best time to introduce mature regulations into the banking sector and called for the standardising of terms and conditions in lending.
"Banks today have different criteria for interest rates despite the Eibor being low."
The experts said consistent regulations should be introduced in the real estate sector in a way that did not affect market sentiment.
Peter Crogan, CEO, BCS Strata Management Services, said: "Issues with respect to the tenure of the work contracts of expatriates tend to cause instability in the market."
They urged the Federal Government to pass new visa regulations that have been drawn up for the real estate sector as this would boost confidence in the market.
Hagkull said: "Sentiment can be raised through the issuing of visas."
Atallah said: "Emaar is revisiting some of its strategies and policies in light of the slowdown in the real estate sector.
"We don't generally make a lot of noise about our policies but we recently adopted a strategy to clean up our toxic assets. We have identified our toxic assets, categorised them and we are taking decisions about some of those assets. "Emaar has not given any 100 per cent refunds to buyers. Instead we are giving credit notes that will allow buyers to swap their properties for others.
"Emaar has issued credit notes to its investors for projects that are not proceeding and have been put on hold. If an investor has bought a unit in a project where building has not started we allow the buyer to switch his investment to another property because we have incurred expenses on the property.
"We are taking everybody's concerns and considerations into account and are willing to offer multiple choices to our investors that will enable them to switch to other investments. This is having a big impact on us."
He said Emaar did not have much of an inventory, adding: "We always relied on pre-selling buildings, which ensured that by the time a building was completed all our units were sold. Emaar is facilitating visa applications for buyers who have the visa clause in their contracts. We cannot guarantee a visa will be issued, however."
Hagkull said the government should prioritise its investments and stay focused on completing projects that had been started.
"For the long-term stability of the real estate sector the projects that have been launched must be completed," he added. "The activities of the developers truly need to be focused."
Mohammed Nimer, Chief Executive of MAG Group, said: "Developers should have in hand not less than 30 per cent of the whole cost of land and construction," he added. "That is the minimum a developer needs to put in and he has to review his financial model very carefully as he cannot rely on making money out of off-plan sales. Unless the developer is professional he cannot survive in the market today."
Lisa Dale, a partner at Al Tamimi, said regulation was a key factor in the market but over-regulation could cause problems.
"Regulation will have to be consistent," she said. "Also we have seen that some of laws, such as law No13, and the way they are written is very simplistic. More clarity in the laws would stabilise the market further.
"Right now Article 11 of Law No13 is being amended, but we think Article 3 also needs to be looked at immediately."
By Anjana Kumar
© Emirates Business 24/7 2009
