Transparency pays off for MAG Group after handover of AED450 million tower in Dubai Marina proves property development in Dubai can work

Honesty is best policy says expert

Transparency pays off for MAG Group after handover of AED450 million tower in Dubai Marina proves property development in Dubai can work

A consistent vision, open and transparent communication and a commitment to quality has helped Dubai-based property developer MAG Group Properties, to deliver what some real estate analysts have described as a model development.

MAG 218 a residential tower in Dubai Marina, was built at a cost of approximately AED450 million consisting of 555 apartments spread over 66 floors. The building was officially handed-over to investors earlier this year on 15 May. To date 530 apartments are occupied with nothing for sale or lease at present.

Commenting Mohammed Nimer, CEO of MAG Group Properties, said: “We stood firm by our strategy. From the outset we wanted to be totally transparent and deliver our promise of a quality development, to specification and on budget. This has paid off handsomely, not only for MAG Group but for the investors as well.”

First of all to enable MAG Group to build a quality mid-priced development it needed to keep its budget under control, choosing to self finance the project, rather than paying interest on a bank loan, which helped to keep the costs down.

Even when MAG Group had some issues regarding late payments from some investors they decided to carry on irrespective, taking the view that the priority was to protect the majority and complete the project.

MAG Group sent the investors detailed and regular updates with fresh images so that they could chart the progress of the development. Results were also posted onto the MAG Group website.

“When milestone payments became due, we had few problems collecting that money. The owners could see the progress we were making and it generated a great deal of trust between us, at a time when investor confidence in many regional projects was beginning to wane. This proves that honesty is the right policy and furthermore quality at the right price can work in Dubai,” added Nimer.

MAG 218 is a highly desirable residential building, not just because of its location and quality of finish but the highly competitive service charges which underscore the overall technical engineering excellence of the design and build.

“Service fees in Jumiera Lakes Towers average AED15 per square foot, the Marina itself averages around AED13 but MAG 218 charges less than AED9.5 per square foot, a very attractive proposition to owners and end users alike,” said Mazen Falhout, General Manager of MAGme Property Solutions, a division of MAG Group.

Currently a one-bedroom apartment leases for around AED70,000 per annum while a two-bedroom flat currently achieves annual rental income of about AED110,000.

As such the owners in MAG 218 are feeling the benefits of such economical service charges, according to Camilla Van Der Merwe, Head of Sales and Leasing at Asteco Property Management.

“This gives apartment owners a distinct advantage in a very competitive market sector. Owners of a one-bedroom apartment, could be paying as much as AED5,000 less than landlords from other developments pay annually,” said Van Der Merwe.

“For investors, end-users and or tenants, it is also comforting to know that the tower is well built and maintained, protecting investment and keeping fees to a minimum. In many ways MAG 218 could be described as a model development,” added Van Der Merwe.

Almost 90% of MAG 218 tower was sold out within months of its 2006 launch, with many investors initially paying an average of AED700 – 800 per square foot. Today, despite falling prices over the past two years, the apartments have still appreciated on average by at least 10%, especially for those investors who bought at or close to the launch price.

Photo-caption:

1. MAG 218 tower in Dubai Marina – a model development.

2. Mohammed Nimer, CEO, MAG Group Property – “Honesty is the best policy...”

About the MAG Group

The Dubai-based Moafaq Al Gaddah Group of Companies (the MAG Group) was established in 1978 and has grown into a multinational organisation with 18 offices in eight countries throughout Europe, the Middle East and Asia.

In the past five years the MAG Group Properties has invested in 12 properties at various stages of development across the residential, commercial and industrial sectors. The company focuses on projects that provide long-term benefits to investors and customers.

Property owners may get that ‘sinking’ feeling over fees

Property owners may get that ‘sinking’ feeling over fees

MAG Me Property Solution advises owners on ‘hidden’ depreciation costs of mechanical, electrical and plumbing (MEP) equipment

Owners of properties in the freehold areas of Dubai could be hit by major maintenance charges which should have been identified prior to purchase, according to the property management arm of a leading real estate developer.

“Some owners are jeopardising the return on their investments by not adequately accounting for depreciation on MEP equipment,” said Mazen Falhout, General Manager, MAGme Property Solutions, a division of the MAG Group.

Dubai property owners now have the opportunity to play an active role in the management of their properties as the new owners’ association management regulations, implemented by Dubai’s Real Estate Regulatory Authority (RERA) come into effect.

Full implementation of the regulations means that as well as routine maintenance and upkeep charges, owners will have to pay premiums to cover complete building insurance as well as an emergency reserve or ‘sinking’ fund to take care of larger maintenance work or replacement of essential equipment.

‘Sinking’ funds are essential to accumulate a reserve fund over time which helps to enhance not only the value of property for the current owner, but makes it more attractive for prospective buyers and the secondary market. It is also important that buyers verify whether such allocations have been made in the service fee budget before deciding to buy.

“When considering a real estate investment, prospective owners should always seek advice from professionals who can evaluate all potential operational costs, as well calculating depreciation or the appropriate deposits for a ‘sinking’ fund,” said Falhout.

“For example to replace a chiller in an average tower building costs around AED2-3 million, that amount must be built-in over ten years when it reaches the end of its working life. If there is no ‘sinking’ fund, owners have to foot the entire bill at that point of time which could be substantial,” he added.

As there is no conformity with common areas, each building or community must be assessed on a case by case basis, by professionals who understand maintenance of the complex engineering in these developments.

“In tower buildings it could be something as simple as electricity supply for lifts, air conditioning, pool chillers, lighting and even car park barriers. With rents falling at least 40% over the last 12 months, many owners are now faced with fees that they cannot simply pass on to tenants if they want to remain competitive in the market,” said Falhout.

“What might seem on the surface to be a good sales price may not be cost-effective over time, when the so called hidden capital and their respective operational expenses have been factored in.

“Prior to June 2008, investors did not care too much about service charges or operational costs, many were only speculating on the rising price. Now that party is over and owners now have to be responsible for their investments,”
added Falhout.

MAGme was specifically set up to provide an array of real estate management services from sales and marketing to property management and owners’ association management.

“Originally we were predominantly instructed to manage, promote and market the developed projects of our sister company, MAG Group Properties. However as we created business relationships with other developers we began to manage their buildings as well as advising investors,” said Falhout.

With so much stock to be completed over the next five years, Falhout believes that the property management sector will grow substantially over that period.

“It’s only natural. The cycle begins with design and investment, through to development, marketing and sales and then handover. Once that occurs owners must manage their property, irrespective of which way the market price is headed,” he added.

Although the macro economic factors such as the dollar-euro and dollar-sterling exchange rates are putting Dubai at a disadvantage at the moment, many Russians, Iranians, Indians and other Arab nationals are entering the market.

“Many overseas buyers are now looking for bargains, they are not concerned about market liquidity, they either have substantial deposits or the means to buy outright,” said Falhout.

Apart from falling prices, another reason for this confidence in Dubai according to Falhout is that Dubai is still way ahead of all other GCC real estate markets in terms of maturity, sophistication and regulation. “Any freehold property even comes complete with a complimentary world-class infrastructure,” he said.

Photo caption: For example to replace a chiller in an average tower building costs around AED2-3 million, that amount must be built-in over ten years when it reaches the end of its working life. If there is no ‘sinking’ fund, the owner has to foot the entire bill - Mazen Falhout, General Manager, MAGme property solutions, a division of the MAG Group.

CEO of MAG Group Property Development outlines proposals to help Dubai’s housing market thrive once again

Property chief eyes real estate recovery

CEO of MAG Group Property Development outlines proposals to help Dubai’s housing market thrive once again

The CEO of MAG Group Property Development, Mohammed Nimer, believes improved liquidity, greater transparency and tougher regulations will be key to the recovery of Dubai’s real estate market.

Nimer, talking yesterday at the Infrastructure and Property Development MEA Summit at the Park Hyatt Dubai hotel, also explained that liquidity and issues surrounding visas will also play important roles.

When addressing the issues of transparency and liquidity, Nimer told the audience at the Park Hyatt Dubai hotel: “Improved liquidity, greater transparency and tougher regulations are needed more than ever to reassure and protect legitimate investors seeking a reasonable reward for a reasonable risk.
“Critical in my view from an investment perspective will be affordability, transparency, return on investment and trustworthy partners. If recent events have taught us anything it is that we must operate in an environment of complete transparency and robust regulation.

“But improved liquidity is also vital to recovery. Transparency and regulation inspire confidence but liquidity makes sales. Mortgage facilities, registration of owners’ association, REITs entering the market can be expected to fuel transactional activity in the coming years,” added Nimer during his presentation entitled “Improving the properties framework to attract and retain investors”.

During his presentation on day one of the three-day summit, the CEO outlined suggestions including relaxing visa rules to attract international investors, who are still nervous following the global financial crisis.

“The relaxation of visa rules is a federal issue but it needs to be consistent and investor friendly. Malaysia and Thailand lead emerging markets in encouraging international property buyers and as such this country could learn from them,” explained Nimer.

“The UAE also needs to attract more expatriate workers and foreign companies as the future depends on population growth and increasing business relationships with rest of world.”

Nimer also outlined how this year will set the precedent for the future, highlighting the need for action to encourage the green shoots of recovery in the local real estate market to flourish.

“The UAE needs to go back to basics. Solid market fundamentals as opposed to sentiment are always at the heart of a sustainable recovery and 2010 is a crucial year for determining the direction of the UAE’s real estate industry as the world pursues post-crisis recovery,” he said.

Nimer brings more than 30 years’ experience in construction and property development to the summit. Having worked in both the Middle East and North America, he has experience in developing both commercial and residential low- and high-rise buildings.

The MAG Group CEO joined a list of distinguished speakers, which also included Jeffrey Willis, Chairman of the Emirates Green Building Council and Gurjit Singh, COO of Sorouh Real Estate Development, to discuss such topics as Upgrading Urban Planning & Design, Green Building and The Return to Value at this three-day summit.

About the MAG Group

The Dubai-based Moafaq Al Gaddah Group of Companies (the MAG Group) was established in 1978 and has grown into a multinational organisation with 18 offices in eight countries throughout Europe, the Middle East and Asia.

In the last five years the MAG Group Properties has invested in 12 properties at various stages of development across the residential, commercial and industrial sectors. The company focuses on projects that provide long-term benefits to investors and customers.

In total MAG has a property portfolio in excess of AED3 billion and was one of the first developers to create Escrow accounts for all of its projects, long before the Dubai Government introduced Law number 8. In October last year, MAG Property Development was awarded ISO 9001 certification by risk management company Det Norske Veritas (DNV). MAG still remains one of the few developers in the region to be accredited to that standard.

Dubai real estate to benefit from higher tax rates in UK as chancellor seeks to narrow £178 billion deficit

UAE real estate to benefit from UK tax hike

Dubai real estate to benefit from higher tax rates in UK as chancellor seeks to narrow £178 billion deficit

Real estate professionals in Dubai are waiting for a potential exodus of UK residents desperate to escape UK Prime Minister Gordon Brown’s new 50% tax rate for individuals earning over £150,000 (AED 900,000) which will come in to force in April 2010 affecting tens of thousands of UK professionals.

“Under the new UK tax rules, somebody with a personal income in excess of £200,000 (AED 1.2 million) will have to pay £5,000 (AED 30,000) more per year in tax. That’s a very strong incentive to relocate to lower or tax-free environments such as the UAE,” said Mohammed Nimer, CEO of MAG Group Property Development.

The tax ceiling rate has been raised as the UK tries to manage its burgeoning deficit of £178 billion. According to a poll by international law firm Withers, 75% of respondents, made up of high net-worth individuals in the banking, insurance, recruitment and accountancy sectors, confirmed that it would be likely for them to move abroad within the coming year. In addition, seven out of ten said they would move their family and their business overseas.

“Although the survey only took in 116 delegates at the conference, it is representative of the professional white collar ‘City’ worker in London. These people are highly educated, highly paid and more importantly highly fluid. They have the sort of job or business that are technologically driven and therefore can easily be adapted to another country,” said Nimer.

The survey was carried out by Withers during a conference on the comparative tax and lifestyle advantages of staying in the UK or moving abroad. Of potential countries to relocate to, Switzerland was by far the most popular with 63% of respondents. The Channel Islands pulled 13% of the vote with Hong Kong, Monaco, Singapore and the United Arab Emirates also mentioned as potential

“Obviously all of these countries have low tax regimes with the exception of the UAE which obviously has a zero income tax rate. Residential and commercial real estate in places such as Dubai will benefit from this. With deficits almost out of control in Portugal, Ireland, Greece and Spain (PIGS) the Euro has come under increasing pressure of late and the UK exodus might just be the thin end of the wedge if tax rates rise significantly across the Eurozone,” said Nimer.

In summary, Nimer added, “Although huge tax savings can be a massive incentive to relocate to the UAE, it has much more appeal, not least of all its safety and security, top private education and beautiful winter climate.”

Photo caption: Mohammed Nimer, CEO of MAG Group Property Development

About the MAG Group

The Dubai-based Moafaq Al Gaddah Group of Companies (the MAG Group) was established in 1978 and has grown into a multinational organisation with 18 offices in eight countries throughout Europe, the Middle East and Asia.

In the last five years the MAG Group Properties has invested in 12 properties at various stages of development across the residential, commercial and industrial sectors. The company focuses on projects that provide long-term benefits to investors and customers.

In total MAG has a property portfolio in excess of AED3 billion and was one of the first developers to create Escrow accounts for all of its projects, long before the Dubai Government introduced Law number 8. In October last year, MAG Property Development was awarded ISO 9001 certification by risk management company Det Norske Veritas (DNV). MAG still remains one of the few developers in the region to be accredited to that standard.

Off-plan property sales model unsustainable; return to traditional buying methods evident says leading UAE developer

Traditional property sales move UAE market

Off-plan property sales model unsustainable; return to traditional buying methods evident says leading UAE developer

Traditional business models that market new properties are gaining in popularity and beginning to generate more sales than off-plan projects, according to a leading United Arab Emirates property developer in UAE.

“Off-plan property sales have proved to be unsustainable,” said Mohammed Nimer, CEO of MAG Group Property Development, which is involved in AED3 billion of developments in the UAE.

“With so many projects heading toward completion and with little difference between the prices of completed and off-plan properties, why would a bank or an owner-occupier take any sort of risk, a completed property is tactile and ready to move in.”

“Sales enquiries for off-plan property have been stagnant now since the third quarter of 2008 – completed properties are however starting to show signs of life,” Nimer added. “Buyers now have the ‘luxury’ of inspecting the actual villa or apartment that they are considering purchasing - no longer are investors risking capital on the basis of an artist’s impression and a salesman’s promise.”

“It’s also interesting that unfinished property prices have fallen further than those for completed apartments and villas,” added Nimer.

“Everyone in the property business today is going through challenging times,” Nimer said. “Prices, targets and ambitions have dramatically altered. But overall the market will benefit from a more rational approach to real estate investment as opposed to the speculative market model of 2007 and 2008.”

The collapse of the off-plan property model affected not only the UAE but other more developed property markets such as the UK and Spain. Those markets moved away from their traditional property buying methods and have seen similar declines with small investors often left holding property with negative equity.
“Mature property markets have turned away from the off-plan model and returned to the traditional buying methods. This means a property development is fully financed by a combination of sophisticated private equity investors prepared to take the risk and the banks. The end-user, or owner-occupier, does not become part of the transaction until the very near completion of the building.

“This means that the risk of a development being abandoned in a tough selling environment is reduced as both the developer, the private equity investor and the banks are too exposed to do anything other than complete and handover the property.

‘In the boom years, we saw small investors take the place of professional private equity investors and, in many cases even the banks, to finance property development with the results we see today. With banks now having little appetite for high risk investments, off-plan is an unsustainable business model - the future is the traditional, completed property transaction.”


Photo caption: “Off-plan is an unsustainable business model - the future is the traditional, completed property transaction,” says Mohammed Nimer, CEO of MAG Group Property Development.


About the MAG Group
The Dubai-based Moafaq Al Gaddah Group of Companies (the MAG Group) was established in 1978 and has grown into a multinational organisation with 18 offices in eight countries throughout Europe, the Middle East and Asia.

In the last five years the MAG Group Properties has invested in 12 properties at various stages of development across the residential, commercial and industrial sectors. The company focuses on projects that provide long-term benefits to investors and customers.

In total MAG has a property portfolio in excess of AED3 billion and was one of the first developers to create Escrow accounts for all of its projects, long before the Dubai Government introduced Law number 8. In October last year, MAG Property Development was awarded ISO 9001 certification by risk management company Det Norske Veritas (DNV). MAG still remains one of the few developers in the region to be accredited to that standard.

Increased liquidity for small and medium sized businesses will drive demand for office space as well as affordable residential property, says expert

SMEs hold key to UAE real estate growth

Increased liquidity for small and medium sized businesses will drive demand for office space as well as affordable residential property, says expert

Small Medium Enterprises (SMEs) could drive demand for both office space and affordable residential property in the UAE if they can secure bank loans to finance start ups, provide working capital and investment for expansion and growth, according to an industry expert.

“It is widely accepted that SMEs account for approximately 80% of the UAE’s economic activity, which means that collectively they employ a large number of staff, require industrial, commercial and office space and naturally employees need housing. However, they are restricted by a lack of liquidity,” said Mohammed Nimer, CEO of MAG Group Property Development.

According to the Dubai Chamber of Commerce these companies are having trouble securing credit from UAE banks. If they do, the terms are short, usually three to six months and the interest rates for unsecured loans are averaging around 15% due to their perceived high-risk category.

According to Ruwad Establishment, there are over 260,000 trading and industrial companies in the UAE of which over 200,000, are classed as SMEs. The UAE classifies companies according to the number of employees and the level of investment and in general an SME has less than 100 employees with an investment range between AED 200,000 and AED 2 million.

“Imagine the stimulus to the housing market alone if each SME averaged just one new employee per annum, not to mention the benefits to the wider economy – airlines, hotels, restaurants, shopping and so on,” added Nimer.

A Dun & Bradstreet report estimated earlier this year that loan rejection rates were in the range of 50-70% due in part to the bank’s difficulty in gaining access to accurate financial statements and in rare cases the complex and time consuming process of recovering money or liquidating seized assets.

Other statistics of the survey provide equally grim reading. Of those polled, just 25% of small businesses used a secured loan and only 13% had used an unsecured loan, while 45% used an overdraft and 55% a letter of credit facility.

Nimer acknowledged government efforts such as the lowering of minimum investment levels to form a company. He also praised the support provided by institutions like the Mohammed Bin Rashid establishment for Young Business Leaders and the Khalifa Fund.

“However more needs to be done to unlock the potential of the SME sector, banks must relax their lending criteria, SMEs are the backbone of many developed economies and they hold the key to real ecomonic growth in the UAE,” added Nimer.

“IT is interesting to note that SMEs are responsible for 30% and 28% of the US and Japan’s exports respectively. China’s 2 million SMEs have greatly increased their exports and Toyota depends on SMEs to produce 80% of its car parts,” said Nimer.

Nimer applauded the recent initiatives to improve transparency and regulations and agreed that liquidity was not the only hurdle the real estate industry needed to clear.

“The Dubai real estate market in particular has witnessed the more unsavoury side of property development. Financial irregularities, land ownership disputes, cancelled and delayed projects and poor quality finishes,” he said.

Nimer agreed confidence needed to be restored, but added that liquidity was at the root of the problem and would continue to play a critical role.

“Owners and staff of new small businesses with aspirations as owner-occupiers will still need mortgages,” said Nimer.

Having been in business now for 30 years, the MAG Group has an enviable track record of stability and consistency and it is that sort of profile that will new investors will be looking for when the inevitable upturn arrives.

In total MAG has a property portfolio in excess of AED3 billion and was one of the first developers to create Escrow accounts for all of its projects, long before the Dubai Government introduced Law number 8.

In October last year, MAG Property Development was awarded ISO 9001 certification by risk management company Der Norske Veritas (DNV). MAG still remains one of the few developers in the region to be accredited to that standard.



About the MAG Group

The Dubai-based Moafaq Al Gaddah Group of Companies (the MAG Group) was established in 1978 and has grown into a multinational organisation with 18 offices in eight countries throughout Europe, the Middle East and Asia.

In the last five years the MAG Group Properties has invested in 12 properties at various stages of development across the residential, commercial and industrial sectors. The company focuses on projects that provide long-term benefits to investors and customers.


Photo caption:

"Mid-range properties will be the first to recover,” says MAG Group CEO Mohammed Nimer.

Dubai’s future domestic economy must focus heavily on expats and foreign companies, says leading UAE property developer

Get back to basics,’ Dubai urged

Dubai’s future domestic economy must focus heavily on expats and foreign companies, says leading UAE property developer

With the global economy going through one of the most challenging periods of economic stress in generations, Dubai’s future domestic economy must focus heavily on continuing to attract expatriates and foreign companies, says a leading property developer.

“I believe we will soon see the bottom of the current crisis but if we are to avoid a recovery like the boom and bust cycle of the recent past, Dubai must return to the basics which first put it on the map,” said Mohammed Nimer, CEO of mid-market development company MAG Group Properties.

“Dubai was hugely successful before the real estate bubble,” said the boss of a company with AED3 billion worth of construction projects in the United Arab Emirates. “As the Arabian Gulf’s most globalised economy, Dubai’s existence has been driven by its power to attract foreign direct investment and the resources necessary to make it work.

“Dubai, a once small pearling village with limited natural resources, led the region in declaring a tax-free, business-friendly environment, attracting outside investment and a large highly skilled expatriate population.

“The basic pluses for Dubai that brought them here have not disappeared in the financial and real estate crisis. Dubai’s geographical position will never change and it remains the primary hub connecting Asia to Europe. It also connects Asia to Eastern, Western and Southern Africa, as well as becoming a gateway from Asia Pacific to South America.

“Dubai’s infrastructure cannot be bettered by anywhere else in the Middle East. Jebel Ali is still the world's largest man-made harbour, the biggest port in the Middle East and home to 5,500 companies from 120 countries. Dubai international airport is the sixth busiest in the world by international passenger traffic and one of the busiest cargo airports in the world.

“What this emphasises is that Dubai’s dependency on the outside world cannot be ignored. The future domestic economy must focus heavily on expatriates and foreign companies and its business relationships with the rest of the world. Now, however, there must be greater transparency, tougher regulations to protect investors and a basic safety net on provisions for the expatriate community upon which the economy is dependent.

“We need to ensure that the UAE remains a safe and secure community and that its tax-free and business-friendly environment is strengthened. Population and employment are basic fundamentals which underpin the UAE economy and reforms which ensure growth are essential to maintain them.

“Solid fundamentals like these which lead to a sustainable recovery and affordable – not speculative - housing whether owner-occupied or rented, lie at the heart of the solution.”

In the shorter term, Nimer said there is still a large supply of new residential and commercial property to be absorbed by the Dubai market. Lower rents and values would ensure that the supply is taken up and “only then will the Dubai property market be stable,” he added.

Photo caption:

Affordable – not speculative – housing, whether owner-occupied or rented, lies at the centre of the solution, says Mohammed Nimer, CEO of mid-market property development company MAG Group Properties

About the MAG Group

The Dubai-based Moafaq Al Gaddah Group of Companies (the MAG Group) was established in 1978 and has grown into a multinational organisation with 18 offices in eight countries throughout Europe, the Middle East and Asia.

In the last five years the MAG Group Properties has invested in 12 properties at various stages of development across the residential, commercial and industrial sectors. The company focuses on projects that provide long-term benefits to investors and customers.

In total MAG has a property portfolio in excess of AED3 billion and was one of the first developers to create Escrow accounts for all of its projects, long before the Dubai Government introduced Law number 8. In October last year, MAG Property Development was awarded ISO 9001 certification by risk management company Det Norske Veritas (DNV). MAG still remains one of the few developers in the region to be accredited to that standard.

Dubai will rediscover its basic business appeal without the glitz, to lead the real estate sector to a sustainable recovery says expert

Once we get there – then what?

Dubai will rediscover its basic business appeal without the glitz, to lead the real estate sector to a sustainable recovery says expert

Many industry commentators have now agreed that Dubai will soon start to see the green shoots of recovery. During a recent Cityscape Connect forum, a panel covering the industry spectrum from investors to real estate agents agreed that Dubai’s property market would start to sprout green shoots sometime between January and June next year.

However the big question now is what shape will the recovery take and even more importantly, how will we know that it is sustainable?

According to Mohammed Nimer, CEO of mid market property development company MAG Group Properties which is involved in AED3 billion worth of projects in the UAE, “The fact that there is a general consensus regarding the end of the downturn is important, but we should now be looking ahead and asking ourselves, how do we make the recovery sustainable, indeed what will sustainable look like?”

Much has been made about the shape of the recovery, V shape, U shape, L shape, W shape or perhaps even a square root shape.

“A V shape recovery would be a disaster - straight back to boom and bust. The others are really a variation on how quickly we pick up, but as always it will be the fundamentals that lead us to sustainable recovery,” added Nimer.

According to Nimer, the key economic indicators are still positive and improving as we move into the second half of the year. The IMF is forecasting UAE economic growth of around 3%. The gap between loans and deposits at UAE banks narrowed in May to AED31 billion, a decrease of nearly AED5 billion since April. The figure had stood at AED90 billion at the start of 2009.

UAE bank lending grew for the first time in May since December 2008, when loans increased to AED207 billion from AED201 billion a month earlier, an increase of 2.9%, despite concerns over AED2 billion outstanding on credit cards 10% of which may default.

“The oil price has doubled since the turn of the year and seems to have stabilised at around $70 a barrel, even though the summer is traditionally a time for weaker prices with less demand for heating oil in the west,” said Nimer.

However concerns remain with population and unemployment which are inextricably linked in the UAE. It is a hot topic at the moment - how many expatriates will not return after the summer break, or may return alone without their families?

All should be revealed by October, but certainly for those who do return, they will be welcomed by more affordable housing. According to Landmark Advisory, rental prices are coming down and Q3 this year will witness falls of up to 25% as more new-build supply comes onto the market.

“I don’t subscribe to the view that people will upgrade their accommodation necessarily, but where I do see pent up demand is from mid management professionals who in the past have had to share accommodation. The size of that potential market must be considerable,” said Nimer.

It has also been widely reported that those expatriates that have lost their jobs and return home may be unwilling to ‘forgive’ Dubai and try again to resume their careers here? Nimer disagrees.

“Some may have no alternative, with their home economies still sluggish with high unemployment. Dubai will by default rediscover its basic appeal but without the glitz – a safe and secure, tax free environment with an advanced infrastructure. That will be too much for expatriate entrepreneurs and business professionals to resist and I firmly believe that they will return.”

In summary, Nimer added, “The recovery will be gradual and sustainable. If I had to put a shape to it, it’s probably a square root, the fundamentals are sound, property is becoming more affordable through basic supply and demand, which in turn cuts business costs whether its commercial rent or employee housing allowance.”

Photo caption: Mohammed Nimer, CEO of MAG Group Property Development

About the MAG Group

The Dubai-based Moafaq Al Gaddah Group of Companies (the MAG Group) was established in 1978 and has grown into a multinational organisation with 18 offices in eight countries throughout Europe, the Middle East and Asia.

In the last five years the MAG Group Properties has invested in 12 properties at various stages of development across the residential, commercial and industrial sectors. The company focuses on projects that provide long-term benefits to investors and customers.

In total MAG has a property portfolio in excess of AED3 billion and was one of the first developers to create Escrow accounts for all of its projects, long before the Dubai Government introduced Law number 8. In October last year, MAG Property Development was awarded ISO 9001 certification by risk management company Det Norske Veritas (DNV). MAG still remains one of the few developers in the region to be accredited to that standard.

Speculators are now responsible for driving property prices below their ‘real’ values as investors pounce on distressed sales

Speculators now dragging the market down says expert

Speculators are now responsible for driving property prices below their ‘real’ values as investors pounce on distressed sales

A UAE-based real estate expert says that the UAE real estate market is still suffering from the antics of speculators flipping properties, amateur landlords and sadly those end users unable to meet their mortgage commitments due to unemployment.

According to Mohammed Nimer, CEO of mid market property development company MAG Group Properties which is involved in AED3 billion worth of projects in the UAE, “Speculators were originally responsible for driving property prices to unrealistic levels. Now although they are on the receiving end of the slump in prices, they are still blighting the real estate landscape by panic selling and undercutting the fair market price.”

Nimer admits this is good news for those wishing to buy property and the real value of a property is simply what somebody is willing to pay for it, but he cites the wider implications. “It makes banks reluctant to lend because prices are still falling and it is difficult for them to ‘feel the bottom’. That’s why we are experiencing loan-to-value (LTV) ratios of 75% - they are calculating the risk,” said Nimer.

On the other side of the coin, Nimer believes that falling prices then unnerve professional and institutional investors for the same reason, which in turn starves developers of funds.

“It’s a vicious cycle,” admits Nimer, “Forget the benefit of lower construction prices we have to wait until these distressed sales are pushed out of the system. Only then we will witness some stability and a return to fundamentals instead of sentiment based on fear and uncertainty.”

In the meantime Nimer welcomed initiatives by some developers and investment groups that are taking the rent-to-buy route to keeping the house sale option open to those that might otherwise lack the confidence or means to commit to home ownership at the moment.

And he also praised Dubai Government’s moves to guarantee job security for all government employees and to extend the work visa expiry period so that redundant expats have more time to try and find work.

“These initiatives will all contribute positively in some way to stabilising the market, “he said.

Overall Nimer did feel optimistic about the mid to long term prospects for the UAE real estate industry. “Although property prices fell dramatically in the last quarter of 2008 and the first quarter of 2009, the rate of decline has now slowed considerably, indicating that the market could be approaching the bottom.”

In addition, with years of massive budget surpluses, substantial Sovereign Wealth Funds (SWF) and oil recently breaching $60 per barrel, Nimer was confident that the UAE Government had the means and the desire to fund major infrastructure projects.

“With government support the UAE will overcome this challenge, but the private sector has to take responsibility for its own actions. Speculators brought us into this situation and unfortunately it looks like we are still waiting for them to finally exit the market. What is of primary importance is that we limit the damage they have done, learn from our mistakes and take responsibility for our own actions,” stated Nimer.


About MAG Group Properties

The Dubai-based Moafaq Al Gaddah Group of Companies (MAG Group Properties) was established in 1978 and has grown into a multinational organisation with 18 offices in eight countries throughout Europe, the Middle East and Asia.

In the last five years the MAG Group Properties has invested in 12 properties at various stages of development across the residential, commercial and industrial sectors. The company focuses on projects that provide long-term benefits to investors and customers.

MAG 218 Tower,Dubai Marina photos , 15/May/2009

MAG 218 Tower,Dubai Marina photos , 15/May/2009

MAG 218 Tower,Dubai Marina photos , 19/April/2009

MAG 218 Tower,Dubai Marina photos , 19/April/2009

Expert calls for coordinated package of measures to kick-start UAE property market

Expert calls for coordinated package of measures to kick-start UAE property market

Government agencies, property developers, banks, insurance companies and brokers need to agree on a combined solution to support sustainable sales drive

A UAE-based real estate expert has called on industry professionals including government agencies such as RERA to help create a coordinated package of measures to kick-start the UAE property market.

According to Mohammed Nimer, CEO of mid market property development company MAG Group Properties which is involved in AED3 billion worth of projects in the UAE, developers, government agencies, investors, banks, insurance companies and even brokers, are all working to their own agendas to try to get property sales moving again.

“Each interest group is having a modicum of success, but it would be far more effective if all interested sectors worked together. From investment and development right through to the hand over, we could manage the entire spectrum of the property cycle and speak with one voice.”

Nimer, welcomed recent moves such as HSBC bank raising its loan-to-value (LTV) ratio to 75% and the decision by other banks and developers to tailor repayment packages for buyers experiencing financial difficulties. However these isolated acts, although extremely positive, are what Nimer is highlighting.

“In isolation these unilateral measures by individual organisations will have limited effect. For example, if a buyer can’t manage a 25% deposit the sale falls through. Easy payment terms are good news for existing investors, but they don’t address new sales,” explained Nimer.

He also pointed out that more developers and investment groups are taking the rent-to-buy route to keeping the house sale option open to those that might otherwise lack the confidence to commit to home ownership at the moment.

And he praised Dubai Government’s moves to guarantee job security for all government employees and to extend the work visa expiry period so that redundant expats have more time to try and find work.

“These initiatives all contribute positively in some way to encouraging property sales, but if all these effort could be coordinated and put into one package, the effect could be much more effective,” he said.

The insurance sector, too, could play their part by initiating redundancy/mortgage protection policies and by doing so help allay fears of being unable to sustain mortgage repayments should investors lose their job.

Nimer also admitted that although it may be considered too high a risk by the industry to offer such cover especially in challenging economic times, there were still many sectors where the prospects of ongoing employment were sound.

“Government workers, doctors, teachers, as well as several other areas in the public and private sectors including facilities management, legal firms, oil & gas, power generation, infrastructure projects, IT and the retail food sector, while by no means recession proof, should weather the economic downturn in tact.

“Just recently, for example, Dubai Internet City reported a 25% increase last quarter in the number of companies joining its FirstSteps@DIC Business Centre, an initiative for SMEs to ‘test’ the market before contracting permanent office space.”

There is still growth out there and I think business leaders and the UAE government can play a key role by urging banks to grant mortgages to people working in these relatively secure job sectors.”

“In summary government regulation, rent-to-buy, redundancy insurance, higher LTV ratios, relaxed lending criteria, extensions to cancelled work visas and above all total transparency will breathe confidence back into the UAE real estate sector,” concluded Nimer.