| Property auctions- The new trend in Dubai |
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 The financial meltdown has not only seen changes in the financial market but also in the world of real estate. Earlier, Dubai’s property scene was dominated by sellers, but now a shift in the market trend is transforming it into a buyer’s market.
Buying property through auctioning is the new emerging trend in Dubai. Two or three auctions have taken place so far, and the trend is expected to take over soon.
A recent publication released by Harbor Real Estate and called “The Harbor Report”, predicted an increase in the number of housing auctions in the Emirates in the coming few months.
“In this crisis we can see a lot of consumer and industry trends emerging, and as the market matures we feel that auctions will be a very good tool for buyers and sellers, to transact when it comes to property in Dubai. Auctions are very popular and well established in many other countries around the world,” says Mohanad Al Wadiya, Managing Director of Harbor Real Estate Brokerage.
Their findings suggest that as the Dubai real estate industry matures, auctions will soon become more popular within the property community. This is not likely to replace the traditional ways of selling, but will rather enhance selling operations and give buyers in the United Arab Emirates more options.
The Harbor Report expected a shift towards auctions as more and more sellers compete and struggle to find buyers. Naturally, in property auctions the person who offers the highest bid on the property wins the right to buy it.
According to Al Wadiya the primary advantage of an auction is that it is competitive, well regulated, fair and transparent. An additional and valuable advantage is that properties under auction are usually purchased at a price that reflects the current market value.
“This is due to the competitive bidding process and the fact that the buyers determine the purchase price,” adds Alwadiya.
Brokerage at risk?
With auctioning gaining popularity, the business of brokerage houses might be at risk. But Al Wadiya doesn’t believe auctions will replace any of the traditional ways of transactions. Auctions will cater to a niche group in the population mix of Dubai so it will complement the environment instead of competing with the core business of brokerage houses.
Yet, an important question here is whether the local market is ready to adopt such auctions. For Al Wadiya, people in Dubai like to buy exclusive things like cars, number plates and property that are available and it’s a matter of creating the right medium to sell these.
“There are two main reasons the market is facing hindrances in auctioning- one is the lack of familiarity with the concept of auctions. Although Dubai market holds a very diverse mix of people but we still feel that the people are not used to this tool, and steps must be taken to increase the awareness in this regard.
“Second the availability of professional auctioneers who can carry out auctions in the proper manners. We’ve seen some companies trying to run auctions but what they lacked was the right skills, as they hired for auctions the same resources that dealt with traditional sales before.”
Online auctioning systems
Buyers attending property auctions must not miss the pre tour, which is usually organized before the auctions take place.
The tour allows buyers to observe all the properties to be auctioned and consequently do their homework.
“Buyers basically need to understand what is the reserve price, what is the fair value of the property and then prepare themselves accordingly. It’s a very good opportunity to get good deals and generate good value for money for buyers,” explains Al Wadiya.
Currently the property acquired through auctions is very limited as the auctioning system is not in place. There are no online auctioning systems through which a buyer can register. The auctions that take place in Dubai are the physical events to which exclusive investors are invited to attend. Moreover, there are no set rules by Dubai land department at the moment, while this is important to govern the actual practice of auctions.
Yet, Al Wadiya told us a lot of initiatives are taken up by master developers and the land department who are either considering or launching their own auctioning divisions.
He says, “There are few brokerage companies that tried to run auctions recently and we know of more who are planning to run with it. That again emphasizes the findings of The Harbour Report, that there is a growing trend driven by consumers demand for more auctions, at the time the market enters the “buyer’s era”. It’s a matter of time for developers and landlords to get involved in auctions.”
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