Time to buy? Distress sales plague Dubai property market hit by COVID-19
By Staff Writer, ZAWYA
Dubai is seeing an increase in distressed property sales as disruptions to business owing to the coronavirus pandemic have put home owners out of jobs or on unpaid leave. Owners are listing residential properties at a 10 to 15 percent discount on the current market price as they seek to liquidate their assets to tide over the crisis.
“There has been a sudden disruption to the property market since the COVID-19 outbreak in Dubai. We have seen a few distress deals in the past few weeks. Landlords who had listed their properties to sell for the past few months have willingly taken greater reductions in price to sell seeing this global crisis unfold,” Farooq Syed, CEO, Springfield Real Estate, told Zawya.
Most such sellers had invested in multiple properties and had already been holding for a long time in the hopes of selling during better market conditions, but the effects of the outbreak soon proved to be far worse than anticipated. With every business affected, sellers who cannot hold anymore or have insufficient cash flow to meet their household expenses and mortgages are putting up their properties for sale.
“Most sellers are investors in multiple properties and own large businesses within the industries most affected: retail, manufacturing, etc. Such sellers will look towards offloading their real estate interests in Dubai in the short term. Single property owners or end-users will [try to sit out] this downturn before selling their properties on distress,” Syed added.
Bigger properties are being offloaded more in distress sales in Dubai. For instance, brokerages are reporting more distress sales of villas/townhouses with two bedrooms and above. However, end-users and families who occupy villas and townhouses will not sell in the short term due to the coronavirus outbreak.
“Big properties not only require higher capital towards down payment but also generate less returns as compared to small properties,” said Kunal Puri, founder and CEO, La Capitale Real Estate.
Brokerages say that they have seen a drastic dip in the total number of inquiries received from marketing portals and their marketing campaigns over the past few weeks. Most buyers are being cautious and waiting to see how the current situation unfolds. Puri added that current market conditions present a good opportunity for investors to purchase property that is cheaper by 10 percent than two months ago.
“There are investors on the lookout for bargains who are willing to close on distressed deals. Buyers’ offers are anything from 30 to 40 percent below the asking prices. Many sellers are still rejecting these offers but one or two are considering,” Volpi added.
Syed forecasted that owners will be willing to sell up to 15 to 20 percent below their fair value in the coming weeks if the pandemic continues and they require a quick cash transaction.
However, real estate agents unanimously advise sellers to not panic but instead do their homework to correctly price the property. Brokerages Zawya spoke to said that if sellers can hold off selling in the short term, they must do so until the crisis unfolds.
Meanwhile, Puri said that if a buyer has been looking to purchase a property, now is the right time since there are bargains available.
“My advice for those who wish to buy and take advantage of distress sales would be to make a decision ASAP as this window of opportunity may not be for too long. Most brokers are operating remotely and would be willing to negotiate excellent deals in the coming weeks,” said Syed.
(Writing by Disha N, editing by Seban Scaria)