Aldar leads the way in Abu Dhabi property resale monitoring

Abu Dhabi’s master developers are following in their Dubai neighbours’ footsteps and beginning to self-regulate the resale of developments in order to safeguard against speculators ‘flipping’ their purchases. This is, alongside soaring construction costs, is what analysts attribute the unchecked price rises in many projects in Dubai to, especially during the course of their development.

Aldar Properties, the largest developer in the emirate, whose backers include government investment vehicles, last month revealed that it would impose restrictions on resales of its projects, especially in the off plan stage.

The changes will be implemented on all apartment and villa sales from October and be applicable for all of the company’s future projects.

Roland Barrott, Aldar’s CEO, said in an interview with The National newspaper that the company had ‘a new way of dealing with the issue’ of property resales, but refused to be drawn on exact details.

Industry insiders have added that fellow master developers such as Sorouh are likely to also bring in internal guidelines covering their future projects, in the absence of compulsory government legislation.

Abu Dhabi-based Al Qudra holding also charges a fee of 2% of the current market value of a unit on all transfers.

The moves follow similar initiatives by master developers in Dubai. Government-backed Nakheel, the company developing the Palms, has ensured that buyers investing in The Trump International Hotel and Tower are required to hold onto their units for a period of 12 months before they can sell them on.

Emaar has also announced a new requirement for investors to have paid 30% of the total contractual amount before they can resell their units.

Abu Dhabi has been able to take lessons from the teething problems that Dubai has undergone with a glut of real estate projects announced and speculators fuelling localized inflation by pushing the market value of developments up, by sometimes up to 250% between announcement and handover.

The lack of liquidity behind some of the purchases, with some speculators only paying the first installments and then looking to offload units at a premium before the next charge arises, also leaves developers open to financial uncertainty in the face of price fluctuations.

According to a report by the Royal Institution of Chartered Surveyors, approximately 80% of real estate sales in the UAE’s capital are considered speculative investments, a higher ratio than now exists in Dubai, where the Land Department has now said that all off plan sale contracts must be registered or be deemed invalid.

This marks a further step in the extension of legislative control over the emirate’s property sector.

It remains to be seen how long it will take before the Abu Dhabi government implements similar safeguarding measures across the board, to protect the city’s growth plans as much as possible from outside influence.

With the government planning to invest $275bn in infrastructure and real estate projects over the next five years, and prices rising faster than in the rest of the UAE (the Al Reem developments show an increase of 83% so far this year) the sooner regulation is tightened to stop the market from overheating, the safer investors will feel.

AME Info