It seemed somewhat fitting that this year's Cityscape Global Exhibition was sandwiched between two other events aimed at bargain hunters - the Gitex Shopper Autumn event on one side, and the Concept Big Brands Carnival offering discount clothes, shoes and other products on the other.
In its pomp, Cityscape Global filled most of the exhibition space at the huge Dubai World Trade Centre on its own, but this year's event had a much more muted feel. Gone were the glitzy launch announcements of past shows, with Dubai Holding's Madinat Jumeirah Living project being the only notable exception.
Yet, given the huge pipeline of residential units already in the market, this was not necessarily a bad thing.
"I was surprised at how few new launches there were, and some of the units they were selling were relaunches, or the same product as last year," Craig Plumb, head of research at JLL Mena, told Zawya.
"There seems to be more emphasis on selling unused or unsold stock rather than launching new product. I'm not saying that's bad news, by any means, it's obviously quite encouraging. It's far more important for developers to sell what they've already started than it is to start new projects."
According to real estate consultancy firm CBRE, there were 516,000 residential units in the Dubai market at the end of June. Cavendish Maxwell's Property Monitor Supply Tracker states that 49,000 units are scheduled to hand over this year, 43,500 are due next year and 25,000 are due in 2020.
These figures are based on developers' own estimates and realisation rates - the amount of homes actually delivered compared to those scheduled to complete - have frequently been below 50 percent in recent years.
However, the pipeline of product launches has continued to build in recent years, and, as the managing director of Asteco Property Management, John Stevens, explains, the generous payment plans being offered to homebuyers has placed a greater emphasis on developers to get projects finished on time.
"There's certainly a delay in project handover, but I don't think it's as pronounced as it used to be because of the post-completion payment plans," Stevens said. "A developer now is all of a sudden motivated to handover on time because they don't get their money (for a property) until they hand it over."
More units, fewer deals Yet despite the greater number of properties on the market, there have been fewer buyers, with Dubai Land Department reporting in July that there were 111 billion United Arab Emirates dirhams ($30.22 billion) worth of property transactions in the first half of the year, which was a 16 percent decline on the 132 billion UAE dirhams worth of transactions reported for the same period last year.
"I think what you've seen is that there is so much supply and so much choice that the absorption rate and the sales rate of all of the projects that have been released is reduced because the buyer has a lot of choices about where they are going to put their dirhams," Stevens said.
This was clearly evident at the Cityscape Global event, with developers offering a range of incentives to potential buyers, such as payment plans, waivers on Dubai Land Department fees, guaranteed rental returns and so on. At the centre of Binghatti Developers' stand was a shiny new McLaren 570S sports car, which CEO Muhammad Binghatti explained to Zawya would be given to any investor who purchased five or more floors of its Millennium Binghatti Residences project in Business Bay.
Brokers, too, were also being heavily incentivised.
Next to the McClaren in a glass case were three giant cheques - for 250,000 dirhams, 100,000 dirhams and 25,000 dirhams, which Binghatti explained would be given to the three brokers who sold the most properties at the event, which comes on top of a 5 percent commission that they were paying to brokers for any sales they achieved.
David Abood, a partner at Cushman & Wakefield Core, explained to Zawya via email that brokers "typically earn between two to five percent" commission for sales booked on a residential unit.
"We believe a one to three percent brokerage fee is fair compensation for a residential sale and any further commissions should ideally be passed on as discounts to the investor/end-user buyers instead," he said.
Binghatti was unapolagetic about his company's strategy, though, saying that the commissions and prizes on offer were his way of maintaining a good relationship with brokers.
"If someone bids higher than you, you've lost that relationship, right?," he said. "The market is widely driven by brokers."
One firm which was bidding higher than Binghatti was Azizi Developments, with a spokesperson for the company confirming to Zawya that it was offering brokers a commission of 7 percent of a unit's sale value.
Payments and prizes
Sobha Realty, meanwhile, matched Binghatti Developers' 5 percent commission offer, and had its own competition prizes, offering any broker who sold 5 million UAE dirhams worth of properties a Rolex watch and any broker who sold more than 30 million UAE dirhams worth of property a Mercedes E-Class.
"You know, this is a crazy time. Cityscape is a very exciting time. You come up with interesting things for strategy partners," Sobha Realty president Jyotsna Hedge told Zawya.
"We definitely are always looking at ways to incentivise the brokers and channel partners.
“They're a big part of this market. This market... I think 90 percent of the real estate deals happen through the brokers so they are a very important partner for us. And we are always looking at ways to incentivise them, and to encourage them and motivate them to sell more."
Niall McLoughlin, senior vice-president of Damac Properties, said the commission it pays to brokers can vary.
"It's not one size fits all," he said.
"As a developer, we look at our inventory that's near completion, we look at cashflows and we say 'OK, here's a project that's in escrow, we want to sell some more of that to increase the escrow balance, pay contractors," McLoughlin explained. "So we say 'let's do a promotion on that one for 30 days where we offer an extended payment plan, a DLD waiver'.
He said the market was "getting a lot more competitive", but disputed some of the numbers consultancies have published in terms of the number of homes likely to complete.
"We have delivered 4,000 (this year). We have a good finger on it, so anyone who says there's 40-50,000 coming onto the market, we ignore them because we know it's not going to happen."
Incentivising has pushed up the cost of sales, he admitted (Damac Properties' second quarter results show that although its revenue rose by 13.8 percent year-on-year to 1.79 billion UAE dirhams, its cost of sales increased by 62 percent to 1.16 billion UAE dirhams, according to an analyst's note from FAB Securities).
Bargain hunters
"You're having to bring value addition to the market. That all costs money and reduces margin," McLoughlin explained.
"Service charges, DLD waivers, price - it's more so a price-sensitive market than it was three to four years ago. Customers are more discerning. They want waivers on DLD fees, they want free service charges, and all of that costs money."
Simon Townsend, a senior director at CBRE Middle East, said the most common incentive being offered by developers are "deferred or delayed payment plans whereby the purchaser can spread the costs of the equity payment over a period post-handover".
"Various developers are offering to support the registration fees, or in some instances, make payments towards moving costs," he added.
JLL's Plumb said that the developer focus, when it comes to their customer offer, has shifted much more firmly towards price.
"The nature of incentives seems to be more cutting the price rather than necessarily giving away free cars or holidays. They're offering generous payment plans and reduced down payments, but it seems to be more about making the overall price cheaper rather than actually any add-ons."
Cushman & Wakefield Core's Abood said that although prices are continuing to fall, the rate of decline is lower (at between 3-9 percent, depending on the project or area) in 2018 than in the previous three years. He added that new regulations aimed at stimulating the market and the rising oil price should mean a "decelerating in price softening" in the future.
Bottoming out?
McLoughlin even went as far as calling the bottom of the market.
"It is a cyclical business. We're seeing now that we're at the bottom of a cycle. We've seen sales compress over the last 12-18 months. However, the sales are still there. In the first six months, we sold over 2.5 billion (dirhams)," he said.
Binghatti, too, remained upbeat, stating that the lower land values had led to the firm investing in a land bank that now stands at four million square feet.
"If you don't buy now, you're never going to make a capital gain. This is the time to make your capital gain, so I see it very positively," he said.
His positivity also seems to be rubbing off on brokers, as he claimed in his interview with Zawya on Tuesday afternoon that the company had sold five properties on the first morning on the exhibition. Either that, or his brokers were more motivated by the commissions and the prospects of taking home one if the giant cheques.
