Dubai off-plan property deals under threat as prices drop

Dubai residential property prices are forecast to fall between 10 percent and 15 percent in 2018, one analyst predicts. (Shutterstock)
Updated 13 January 2018
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Dubai off-plan property deals under threat as prices drop

LONDON: Higher interest rates and falling property prices could hit Dubai developers’ transaction volumes linked to the purchase of properties off-plan, warn experts.
Craig Plumb, head of research at property advisory firm JLL in Dubai, said rising interest rates were undoubtedly a negative for residential real estate markets and Dubai was no exception. 
But he said the Dubai market was less susceptible due to the higher number of purchases made with cash or using interest-free finance plans offered by developers.
Jesse Downs, managing director of Phidar Advisory, a real estate consultancy in the UAE, said developers have been offering generous off-plan purchase deals. These often involved offers to pay between 40 percent and 60 percent of the sale price two years or more after completion, she said.
In the past, developers offered a standard payment plan which was 70/30 — meaning 70 percent money paid during construction in staggered payments, and 30 percent paid on handover. Today, there are offers of 20 percent on booking and 80 percent on handover.
Such deals have grown more popular since the introduction of a mortgage cap that has depressed the secondary sales market — with buyers spotting an easier way to get on the property ladder, said Downs.
But if the market falls too sharply and sentiment turns, there may be danger ahead.
“Potentially, there would be a bigger impact when less of a percentage has been paid down on the product,” said Downs. That’s because with less to lose, some buyers may be tempted to cut their losses and run, if they think prices won’t recover.
Downs said: “These ... deals are artificially driving supply up … encouraging overbuilding which drives up market risks.”
But she isn’t envisaging anything like the situation that followed the great financial crash when the Dubai property market almost imploded. “There might just be an odd project here and there, but also keep in mind there is a (government) program in place for orderly transfers.”
Downs reckons Dubai residential property prices are forecast to fall between 10 percent and 15 percent in 2018.
“We see the residential market softening further this year — about 3 percent per quarter. It’s an inevitable, delayed correction — it needs to happen,” she said.
Last year, Standard & Poor’s said the historically low oil price and strong dollar would continue to push property prices down in Dubai, while prices in Abu Dhabi would follow suit.
In 2017, apartment rents fell 8.4 percent and the price of single family villas were down 14.5 percent, according to data by Phidar. But more pain would be felt this year, Downs warned.
The core of the problem is that job creation is down, while supply is still growing steadily. “People’s budgets have been hit by lower disposable income following benefits cuts. The introduction of VAT means another hit, although not a big one, but people are going to be more careful, and this puts downward pressure on rents,” she said.
Dubai’s economy has been knocked by the drop in oil prices with banks, oil companies and even schools cutting jobs to reduce costs.


China sorghum imports jump after Beijing dropped probe into US shipments: Customs

Updated 23 July 2018
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China sorghum imports jump after Beijing dropped probe into US shipments: Customs

  • China brought in 450,000 tons of sorghum in June, up from last year’s 324,301 tons
  • Corn buyers, meanwhile, scooped up cargoes on worries over the return of US-China trade policy tit-for-tat amid high domestic prices

BEIJING: China’s sorghum imports in June surged 38.1 percent on year, boosted by a temporary easing of Sino-US trade tensions, while corn imports for the month rose to one of highest levels in the past decade, customs data showed on Monday.
China brought in 450,000 tons of sorghum in June, up from last year’s 324,301 tons. Volumes were still down slightly from 470,000 tons in May, data from the General Administration of Customs showed.
Beijing announced in mid-April that importers of sorghum from the United States would have to put up a 178.6 percent deposit on the value of shipments. Several cargoes already on the way changed course and were diverted to other markets.
A month later in a goodwill measure, however, China dropped the deposit and an anti-dumping probe into US sorghum imports as the two sides appeared to be reaching consensus on resolving trade issues.
“Some cargoes were already on the way to China when Beijing dropped the deposit. Then they cleared customs in weeks after. That should have pushed up the June volumes,” said Cherry Zhang, an analyst with Shanghai JC Intelligent Co. Ltd, before the data release.
Corn buyers, meanwhile, scooped up cargoes on worries over the return of US-China trade policy tit-for-tat amid high domestic prices.
Corn imports in June hit 520,000 tons, up 34.6 percent from a year ago and the second highest since July last year. The figures were down from 760,000 tons in May, the data showed.
The corn imports in the first six months tripled to 2.21 million tons, already close to China’s total 2017 purchase of 2.82 million tons of the grain, according to the data.
“There were margins importing corn as domestic corn prices were relatively high. And buyers were buying more corn in recent couple of months to prepare for the Sino-US trade tension in advance,” said Meng Jinhui, an analyst with Shengda Futures.
UScorn and sorghum shipments to China should drop significantly in July and August, analysts and traders said, as Beijing imposed a 25 percent tariff on US grains on July 6.
China buys almost all its sorghum imports from the United States.
In the first half of this year, China has brought in 3.25 million tons of sorghum, up 8.7 percent from the same period of 2017, the data showed.
China also brought in 590,000 tons of barley in June, down 5.6 percent from a year ago. Barley imports for the first half of the year were at 4.4 million tons, down 2.7 percent.
Wheat imports were at 310,000 tons in June, down 33.6 percent from a year ago. Wheat imports for the first half were at 1.95 million tons, down 26.4 percent, the data showed.
China bought 280,000 tons of sugar and 98,566 tons of pork in June. In the first half of the year, China’s sugar imports were at 1.38 million tons, and shipments of pork were at 647,985 tons, both down from last year’s levels.