Understanding the motivation of buyers is the key to success in the real estate business, says Lewis Allsopp, the CEO of Allsopp & Allsopp. In the current market, Allsopp believes many homebuyers are being driven by lifestyle preferences. They are “not buying with their heads but with their hearts”, he says, and often base their decision on the availability of swimming pools or fitted kitchens instead of price.
Allsopp oversees a family business that specialises in residential sales and lettings, while also offering property management, conveyance, and mortgage services. Despite a general slowdown in the market, Allsopp is bullish about his business prospects, noting that the company’s rental agent contract value has gone up by 38 percent year-on-year.
End users such as tenants and property owners account for a majority of Allsopp’s business — underlining a more intimate relationship with customers that he tries to nurture at each given opportunity. (He recently partnered with a pizza company to give away a “move-in box” to clients who are moving into their new homes.)
Are you seeing more end-user transactions as opposed to investors?
Yes, about 90-95 percent of people we deal with are either tenants or owners/end users. This market is very stable. Sometimes people who were renting two years ago are now buying, maybe after they have a child.
About 25-30 percent are buyers; the rest are tenants. The cycle in Dubai is different from that in other places. In my home country, which is the UK, you start with living with parents, then rent, and then buy. Here you skip the first step and go directly to renting and then owning.
Once people make the decision to make Dubai a base, they take this step of buying property since they don’t want to rent. The property market itself may be erratic but the market we work in is very constant.
How is the property profile – the kind of stock that is being delivered — changing in response to market conditions? How is it different from what was available when freehold was first established?
I recently bought property at Jumeirah Golf Estates. It’s off-plan. I was not expecting much, but I was very pleasantly surprised. I think the quality and standards in Dubai are now much better. The actual quality of the buildings is much better. There wouldn’t be a major developer today who would think that the finishes and quality they had in 2006 are good enough now.
You’ve launched a website for off-plan listings.
We specialise in ready property. About six months ago, we set up an off-plan team. I realised that there is no go-to company for an off-plan search. If you want to invest, you have to sit with the broker or go directly to the developer. Here, before you need to speak to an agent, we give you information. Every piece of information that is required to make a decision is there — floor plans, interiors, videos and why we think this investment is good.
Are you vetting the properties before you list them on the off-plan site?
Yes, we are. We go through the complete picture, ensure that the developer has a good reputation, that the escrow account is in place and that marketing plans are there. It’s a stringent process and we are listing only reputed developers. We are not taking the marketing material about the property from the developer. We write the descriptions ourselves, covering various aspects.
Off-plan is a good investment for many people. Maybe they want to make money on the property but don’t have the money ready yet — off-plan is the go-to place. People may have Dh100,000 saved and that may not be enough for ready property, but just enough for starting on off-plan.
In phase two, the website will have the functionality to reserve the property online because we will be linked to the platform. We’re getting developers onboard for this.
Are you going to enable property transactions online? Is that already happening on your website for a ready property?
On our website, you can reserve on the spot. Buying requires many forms and legal papers, so it does not happen often. In a rental property, it is more common. We do several online transactions in a day since we launched it a year ago.
What are the biggest trends you’ve seen in residential real estate given that you’ve been in the market since 2008?
Because of the Real Estate Regulatory Agency guidelines that require you to have an agent, the market is now streamlined. [The new guidelines state that any company that wishes to list properties for sale will need a permit for each of the properties]. This means that online presence has dropped and duplicate listings have disappeared.
In Dubai, so far only the buyer pays the broker fee. Now the seller also has to pay a fee. You have to select the right broker. And you have to decide whether you want a broker with limited reach or one that can get you more buyers and more viewings. Sellers are now more open to speaking about exclusivity, which wasn’t the case earlier.
There is a big change in what buyers are looking for. It is no longer just value for money but the quality of a property. They will pay more if the kitchen is fitted out well, if the pool is ready and if the cinema works. If they walk into a property, they are not buying with their heads but with their hearts. Earlier they would be very concerned about the per-square-foot rates and if the rates did not suit them, they would not do the deal. Today, there is a lot more sentiment in the market. It makes it easy for us to create a picture of a lifestyle that would be possible.
Some of the properties in Dubai, which were built 10 years ago, they don’t have this factor where people walk in and say “wow”.
There are diverse opinions on whether the prices have bottomed out — Q1 has seen no decline in prices for the first time in at least a year.
There is no real right answer to this. In 2008, I remember reading that Dubai is recession-proof. After [the global economic slowdown in 2008] happened we realised that no one has a crystal ball. I can tell you that buyers’ registration is at a high point. There are some areas, such as the Burj Khalifa and Dubai Marina, which will continue to hold value. There are so many launches on the outskirts. Naturally, the further you get out of the centre, the lower the prices. I think in three to five years, we will see massive differences between core and external areas. People will pay more to be in central areas.
Dubai’s population grew by 181,000 in the last year. These people need some place to live in. There is no oversupply. Even if you say out of the 181,000 only 10 percent are going to move into their homes, it is still 18,000 people. That’s about the number of [residential handovers in Dubai] last year.
What do you think are the three biggest changes that we will see in the UAE property market in the short and medium term?
Landlords are seeking proper management. Any assets or property, as it gets older, will have issues. Landlords don’t want to deal with complaints so they are seeking professional companies who can look after the property. Maintenance is now the focus for wealthy investors who own properties and want them looked after.
I also see the mortgage cap being released. In my opinion, the market has taken a dip in prices but it is fully controlled. When the market was booming, they put the cap and doubled the transfer fee. When the government decides that it wants to release the cap, there will be a lot more investors and end users who can afford to buy. At the moment, at nearly 30 percent minimum required for down payment and expenses, they are leveraged out. The release of the mortgage cap will make transaction levels go through the roof. A year and a half to two years before 2020, you may start to see movement — so we will go into 2020 with a booming market.
The average price of an entry-level villa is Dh2 million. If someone is renting a villa for Dh500,000, they would buy a villa costing Dh5 million-Dh7 million if they had the opportunity. Currently, the mortgage restriction is at Dh5 million.
Also, the after-sales process may get smoother. At the moment there is no licensing in place. In mature markets such as the UK, there are companies that take care of it. Here one finds that estate agents are being trusted to discharge multimillion mortgages. There are processes required for no-objection certificates and maintenance fees, etc..
What is your take on affordable housing?
We don’t [operate in] the lower end of the market. Our average sales price is Dh2.78 million. We deal with properties in the locations such as The Springs, Dubai Marina, Arabian Ranches and Jumeirah Golf Estates. We don’t get involved in low-end locations such as International City. That is where you see the value drag down.
Who is your primary buyer — has that profile undergone any changes?
The buyer profile changes from area to area. In Emirates Living, of the transactions we have handled, 73 percent were mortgage and 27 percent cash. End users comprised 86 percent of buyers and investors 14 percent. The biggest chunk of buyers, 53 percent, were aged 31-45 years old, 35 percent were over 46 and 12 percent were 18-30.
In Arabian Ranches, mortgages dominated at 75 percent of transactions and cash transactions were 25 percent. End users accounted for 88 percent of buyers, while 12 percent were investors. Here buyers aged over 46 comprised 60 percent of buyers and those 31-45 years-old comprised 40 percent.
In Dubai Marina, mortgages were 45 percent and cash was 55 percent. End users were 27 percent, whereas 73 percent were investors. Again, the 31-45 age group comprised the majority of buyers at 64 percent and 35 percent were aged 46 and above.