ABU DHABI // Flat hunting in the capital has never been easy.
Prices are coming down - by an average of nine per cent in the year's second quarter - but those gains are offset by a variety of fees charged by property agents.
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Fees are not a new phenomenon, but the glut of flats on the market and the sheer number of agents in town are prompting some agents to find new ways to make money.
A Canadian flat hunter said she had been asked by several agents to pay a Dh2,000 fee for a rent quotation, which her company requires.
"It is a nightmare and may be enough to keep me living where I am now, putting up with having to search for parking for an hour or not moving my car on weekends, because there would be no parking when I came back," she said.
A Dutch national said she and her husband paid Dh7,000 in commission to an agent, far more than the customary five per cent charged by property companies.
"They just sort of weigh you down," said C W, who eventually settled on a flat in the Tourist Club area.
"You say you want a one-bedroom with a balcony, and they show you a two-bedroom with no balcony. You get so frustrated that you agree to pay whatever they want."
Neither woman wished to be identified.
The agents see it differently.
Joshi Chacko, a freelance agent, said he often charged a viewing fee of between Dh50 and Dh100.
"It's not for everyone," said Mr Chacko. "It's just to make sure no one wastes my time if they do not plan to rent for many months."
Levying fees, even high ones, was not illegal, according to Ali Al Hashimi, of the municipality. Property agents primarily operate independently, and the capital does not have an equivalent to Dubai's Real Estate Regulatory Authority (Rera), which manages the industry there.
Another freelance agent said he usually charged 5 per cent commission, unless the rent was less than Dh75,000.
"I have heard about companies charging fees, but we don't do it," said Munther Al Bakri, the director of Gravity Real Estate.
"Our clients wouldn't accept such fees, but honestly and personally, I don't blame people for trying," Mr Al Bakri said. "Nowadays, it's an open market and there are many, many agencies. There's huge competition, and they have to find a way to make money."
Bilal Patel, a manager at Al Motamaiz Real Estate, which does not charge any fees, said the practice was not widespread but had been increasing this year.
"Ninety-five per cent of the agents only charge the five per cent commission, but it's increasing because renters are coming in and saying, 'Show me 10 flats' and then they don't take any of them," he said. "When people have to pay to see, they will be wise in their choices."
The big picture is that a new municipal initiative called Tawtheeq, which aims to regulate the real estate market by collecting data on all properties and tenancy contracts, will eventually see the emirate setting industry standards.
"There are no laws now on what fees real estate industry professionals charge, but once Tawtheeq is operating, we will be able to control and regulate what fees they charge," said Mr Al Hashimi, the project manager for Tawtheeq.
Once in place, the initiative will simplify the process of finding and leasing property by creating a searchable database of all leasable properties in the capital. Tawtheeq, set up by Executive Council decree, also aims to strengthen the relationship between tenant and property owner.
A common database will also help to keep accurate and up-to-date statistics on vacancies and rental prices. Many agents and companies said they would welcome industry regulation.
"There are no rules, no standardisation," Mr Al Bakri said. "We approve of the regulations, because if there are standards, things can be measured, and we believe we are going to excel.
"As long as general rules don't apply, customers and agents are at a disadvantage."
For residents, government oversight had been a long time coming.
"Everyone complains about the goings-on," the Canadian flat hunter said. "There's no government control ... It's highway robbery."
The first phase of Tawtheeq - registering properties on the online system - is expected to be completed in October. Use of the programme is expected to begin next year.
jthomas@thenational.ae
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Zakat: an Arabic word meaning ‘to cleanse’ or ‘purification’.
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Zakat Al Fitr: a donation to charity given during Ramadan, before Eid Al Fitr, in the form of food. Every adult Muslim who possesses food in excess of the needs of themselves and their family must pay two qadahs (an old measure just over 2 kilograms) of flour, wheat, barley or rice from each person in a household, as a minimum.
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Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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Maratha Arabians 138-2
C Lynn 91*, A Lyth 20, B Laughlin 1-15
Team Abu Dhabi 114-3
L Wright 40*, L Malinga 0-13, M McClenaghan 1-17
Maratha Arabians won by 24 runs
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(All matches start at 2pm UAE)
1st Test Lord's, London from Thursday to Monday
2nd Test Nottingham from July 14-18
3rd Test The Oval, London from July 27-31
4th Test Manchester from August 4-8
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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