Aldar Properties is to introduce strict resale restrictions on its latest launches in an attempt to curb speculation.
The Abu Dhabi developer, which will be seeking to sell more than 700 homes at Tuesday’s Cityscape exhibition in the capital, plans to prevent buyers from selling units until they have paid 50 per cent of the purchase price.
Abu Dhabi’s largest listed property developer plans to build 233 homes at its Al Hadeel scheme in Al Raha Beach near to its Al Bandar project and a first phase of 546 homes at its Ansam project on Yas Island overlooking Yas Links.
Aldar also said that it would release for sale 140 plots of land on its Nareen Island project close to Al Bateen, which will be sold as villa plots to Emiratis.
Off-plan sales for the three projects will commence next month and construction is scheduled to begin next year. They will have a combined value of Dh5 billion, Aldar said.
“Buyers must pay 50 per cent of the property value – no one is allowed to pay less – before they can sell the property,” said the Aldar chairman, Abubaker Seddiq Al Khoori. “All factors point to the fact that the market has learnt from the mistakes made last time. Buyers are now more careful, developers are more cautious and study the market carefully because of the problems of the past.”
Speculation on off-plan property sales was one of the elements blamed for fuelling the UAE property bubble that burst dramatically in 2008.
As property prices rocketed, speculators turned to “flipping” off-plan homes by putting down small deposits on them and then selling the contract on for a quick profit, inflating prices even further.
The practice has prompted companies such as Emaar to attempt to curb speculation by saying it would refuse to transfer the names on purchase agreements until buyers had paid up to 40 per cent of the value of the home.
Nonetheless brokers say that speculators have been getting around the new restrictions by drawing up their own agreements to sell, regardless of the required contractual milestones. Properties sold by Emaar under similar rules have appeared for sale on property website Dubizzle just hours after they were purchased off-plan, often at much higher prices.
They also warn that relaxed payment plans for off-plan properties are making it easier for buyers to make risky purchases.
Aldar said that its new flats would be sold to off-plan investors through a payment plan where investors pay 50 per cent of the value of the property during construction and the other 50 per cent after the properties have been built.
The new off-plan sales launches are Aldar’s first aimed at the mass market since the company was hit by the global financial crisis, prompting it to sell some of its major assets to the Abu Dhabi Government and to merge with its rival Sorouh last summer. Since then, the company says it has turned itself around by cutting debt and costs.
“If you looked at the market one year ago there were both hopes and positivity but also fears. But this year we have noticed increased prices and increased purchases due to an improving balance of supply and demand and also because there is legislation in place from the government to control lending,” Mr Al Khoori said. “Going forwards developers will be cautious as to how much and what projects they launch. Banks will not give loans of 80 or 90 per cent for off plan purchases now.”
Aldar said that the three projects would be delivered during the first quarter of 2017. Construction tenders will be awarded late this year or next.
The company reported that during the last 18 months, apartment prices at its Al Raha Beach developments had risen by between 10 and 12 per cent.
“It is interesting to note that in Abu Dhabi a lot of the new deliveries have come on stream, but we are seeing very little new construction,” said the Aldar chief development officer, Gurjit Singh. “A year or so ago there was a policy for those who were working in Abu Dhabi government sector to shift back to Abu Dhabi. We saw that as one of the main catalysts in the demand for rental property. When that happened we also predicted that at that point in time a year or so later a lot of these people who have come back from Dubai may now convert from being a renter into being a purchaser. And we are seeing this trend, especially in our Al Raha Beach schemes.”
Aldar said that it has a total of 23 developments under consideration – a portfolio that includes the massive Alghadeer development near the Dubai 2020 Expo site.
It said that the projects would be financed through off-plan sales and through the company’s own cash reserves and that the company would “absolutely not” need to go to the banks for financing.
“We have seen a rebound in residential activity [in Abu Dhabi] over the past 12 months, driven by government intervention and positive economic growth,” said Matthew Green, the head of research at CBRE Middle East. “The revival of the residential sector is likely to encourage further new development launches over the coming months, while we also expect to see work restart on some currently stalled projects as market conditions improve.”
lbarnard@thenational.ae
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