Dubai’s biggest developer, Emaar Properties, has started proceedings to seize real estate from buyers who have defaulted on payments in apartments.
It is sending letters to owners in flagship development Dubai Marina saying that 40% of the amount they have paid so far will be kept and the properties auctioned if they fail to pay the installments within two weeks.
They are the most high profile developer yet to take advantage of new rules which allow them to repossess properties of those who are behind with payments of the development is 80% or more complete.
The letters are being sent via the Dubai Land Department, which has the power to enforce termination notices. Emaar’s action follows similar notices sent by dozens of other smaller developers including Al Fajer Properties and Al Mazaya Real Estate.
If payments are not made, the properties will be auctioned by the Land Department, with the money from the sales going to the developer unless the sales generate a surplus, which is passed on to the original buyers.
Mohammed Sultan Thani, the director general of the Dubai Land Department, said the department’s role was to act as a mediator in such cases.
There are signs, however, that the real estate market is recovering in Dubai with a new report showing that average residential property prices rose by 2% in the first quarter of 2010 compared to the same period last year.
Prices have now risen 4% since the last quarter of 2009 creating confidence that the downturn which resulted in price falls of 50% in some locations is now at an end. It is also the first annual increases since the emirate’s property market collapsed towards the end of 2008.
The average house price in the first quarter of the year was AED1,061 ($288.85) per square foot, compared to AED 1,022 ($278.23) in the fourth quarter of 2009, according to the report from Colliers International.
Apartment prices in the emirate rose 6% in the first quarter compared with the previous three months and villa prices increased 2% while townhouses were down 4%, the house price index showed.
Prices have now returned to 2007 levels, but the report warns that a large number of new units due for release could have a negative impact on the real estate market and even bring prices down again.
The report estimates that 41,000 residential units will flood onto the market in 2010 mostly in the low to middle income segments and demand is not expected to match the growth in supply, creating downward pressure on property prices.
‘Despite the stability that the market appears to have achieved, a number of concerns remain. There will be significant oversupply in the market by the end of the year so it is anticipated the index will experience fluctuations in value going forward,’ said Ian Albert, regional director at Colliers International.
‘What will be important to watch is how much of that supply matches the end user demand for community oriented developments,’ he added.