ABU DHABI // The movement to dampen speculation in the property market is gaining momentum among developers, with Aldar Properties planning a set of restrictions for resales on its next phase of properties coming onto the market later this year. Ronald Barrott, the chief executive of Aldar, said the changes would be implemented on its apartments and villas that go on sale in October and November. The practice would be included in all future releases of property.
"A degree of speculation can be good, but it needs to be tempered," Mr Barrett said. "You can't let the market get out of control, otherwise you have what is going on in Dubai. That is not a criticism, but there is overheating there. What you want is a market that moves quickly, but is sustainable." Mr Barrott would not elaborate on how Aldar will slow down the resale of properties, but he said it would be "quite a new way of dealing with this issue".
In the past week, several developers in Dubai and the emirate's Real Estate Regulatory Authority (Rera) have revealed they are working on strategies to slow down speculation. Nakheel now requires new buyers at the Trump International Hotel and Tower to hold onto purchases for a full year before they can resell. Emaar requires buyers to have paid 30 per cent of their total payment, while Union Properties is charging a transfer fee as a disincentive. Marwan bin Ghalita, the chief executive of Rera, said that speculative investment "is one of the things we are looking at".
"Speculators are not helping the market, and in some projects the price is inflated so much that the end users we are looking for can't buy," he said. Transactions in Dubai have soared by 180 per cent to Dh112 billion (US$30.5bn) in the first six months of this year, compared to Dh40bn for the same period the year before, according to Rera. The number of apartments sold in the period increased by 63 per cent to 3,652, compared with 2,241 the year before.
This week, however, the Dubai Land Department tried to assuage investors after property stocks - including those in Abu Dhabi - sunk dramatically on a Morgan Stanley report that predicted price declines would come as early as next year and reach 10 per cent by 2010 in Dubai. The fact that Abu Dhabi developers are now assessing the situation indicates that a consensus is growing within the industry that the UAE property market needs to be controlled in some way.
The emirate had its first taste of rampant speculation at Cityscape in May, when buyers stormed the Aldar tent and had to be restrained by guards. Tickets to the conference were being resold in the hallways for a premium, according to John Sandwick, who was the then Cityscape chairman. As much as 80 per cent of sales in Abu Dhabi and 50 per cent in Dubai are now speculative investments, according to the local chapter of the Royal Institution of Chartered Surveyors.
Mahmood Ebraheem al Mahmood, the chief executive of Al Qudra Holding in Abu Dhabi, said that the company had recently started charging a transfer fee of two per cent of market price as well as pricing apartments at higher levels in order to repel speculators and attract buyers who actually wanted to live in the buildings. "Abu Dhabi is not trying to position itself as a highly speculated market," Mr Mahmood said. "There is a clear development plan until 2030. We have to be a bit smarter and really be responsible."
He said that Abu Dhabi developers would begin to take extra steps to understand who their buyers were to ensure the future of the market. "More and more developers will try to know their clients, know their commitments and means," he said. "This is really up to the developers. We want people to live in the buildings."
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