Dubai market at ‘tipping point’ as Rera warns against halting payments
HSBC cautioned that prices in Dubai could be approaching a ‘tipping point’ with the number of properties being put on the market jumping as some investors either seek access to liquidity or find that they can no longer afford the finance for their units.
The report showed that prices in the emirate rose by an average of 4% during November after going down by 4% in October, fuelled by interest in smaller properties, although it cautioned that they were likely to fall in subsequent months – echoing similar predictions by property analysts in the city.
The bank attributed the coming slump to concerns over job security and a shortage of liquidity and financing.
The number of properties put up for sale last month grew by 36%, especially in the newer areas of Jumeirah Beach Residence and Business Bay, but the number of actual transactions has fallen.
Banks are also requesting higher down payments when considering home finance options. The average figure requested prior to lending has now risen to $220,000, up from $98,000 in September. Analysts say that this reflects concerns about the stability of current prices and the possibility of defaults by investors.
Rera warns against payment stoppages
Capitalising on this sentiment of uncertainty a number of groups have been messaging investors in Dubai’s property sector via email and SMS, urging them to stop all payments for their units.
Dubai’s Real Estate Regulatory Authority has responded by advising residents to ignore these messages, cautioning that stopping payments without verifying their contracts or seeking legal advice could result in the loss of their investment.
‘People are being misled by mass emails and telephone calls telling them to stop making payments towards certain developments, but if you stop payments you could end up losing your whole investment,’ said agency CEO Marwan bin Ghalita.
Rera’s regulations state that investors who have paid over 20% of a property’s total value can halt payments if the developer has yet to begin construction, but this does not apply if construction has already started.
The regulator is in the process of setting up a free legal panel to offer help to investors with questions on the city’s property sector.
Rera said that the groups behind the email messages were from speculators targeting buyers in an attempt to induce distressed sales, lower property prices and profit from cheap property deals. Some of the groups, however, appear to be from watchdog organisations who are trying to warn investors against paying into projects that may not see completion.