Giant UAE developers introduce measures to reduce speculative ‘flipping’ of off plan homes

The National

Aldar Properties [Abu Ahbi’s largest] is to introduce strict resale restrictions on its latest launches in an attempt to curb speculation.

“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.

 

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