First-hand tips from buyers and sellers on how they got or fixed the best price on a house
Published: February 28, 2021 17:27Hina Navin, Special to Gulf News
Dubai: The price tag of a house listed on property portals is one of the first things that draw homebuyers’ interest towards a real estate unit in the UAE.
However, even when the potential home looks perfect, if the price doesn’t align with the buyer’s budget or turns out to be overpriced compared to market standards, the buyer tends to withdraw their interest from the possible unit.
Seeking discounts on listing price?
Dubai-based specialist dentist Dr. Teena John found a townhouse with a vast garden space, well within her budget – below the Dh 2 million listing price seen on a property portal.
Teena John
She was prompted to inquire about the residential plot with the listed agent, when looking for a property in a community that was both kid- and pet-friendly. She found the Noor Townhouses in Town Square best-suited for her needs.
“Our agent had helped us negotiate the deal price, securing roughly 10 per cent savings on the property’s listed price. In September 2020, we purchased this townhouse property and the discounted savings from the deal we spent to upgrade our garden,” said Teena John.
As seen over the past few quarters, Gaurav Aidasani, Managing Director at Union Square House, remarked that Dubai is currently a buyer-dominated market.
Gaurav Aidasani
“Generally, depending on the property features, buyers have been successful at negotiating 5 to 10 per cent of the listing prices. Some buyers have been able to achieve a 15 per cent decrease on apartment listing rates if the unit had been on the market for a while.”
“In areas where the service fees have been higher, the seller has been more willing to compromise and lower the listing prices. However, communities with developed amenities often face a lesser difference in listing price as compare to individual and unfinished communities,” Aidasani explained.
Listings with premium rates
Founder and CEO of a logistics company, Deepak Khushalani is considering whether to list his three units in Burj Vista Downtown for sale, at a premium price that is up by 15 per cent.
Deepak Khushalani
“Overall, Burj Vista units are selling at an 8 to10 per cent higher premium than other apartments in the community,” said Khushalani, who considers Dubai his home and is a veteran investor in Dubai real estate.
In 2019, he, along with his partners, purchased six units – 2- and 3- bedroom apartments on a single floor of Burj Vista in Downtown Dubai – directly from the developer for investment purpose. “I had earlier sold three of the six apartments, and one is on a long-term rental contract and the remaining two are run as holiday homes – i.e. short-term rentals, which I now intend to put on sale.”
A property listing price must be appropriately determined to make the property sell faster and achieve the unit’s right selling price, Khushalani added.
“I am not a distressed seller as these units are already on rent, earning me 3 to 4 per cent rental income. Moreover, the three apartments are fully furnished units, two of which overlook the Burj Khalifa. Also, the service charges on these properties are lower than the other properties within the community, allowing the buyer to save on annual service charges. These factors give me a differentiating factor to list the properties at a slightly higher price,” he said.
As a family, they had also purchased six plots in Pearl Jumeirah in 2015 directly from the developer to build their family residences. “I saw a decline in the selling prices for these plots a few years back as many new projects with ready villas were launched. But currently, I have been offered much higher sale price offers, as villas are more in demand than apartments in these post-COVID times,” Khushalani said.
Aidasani explained that the listed price is determined by several factors like the seller’s goals, current market value, and property features. However, some factors like demand, the buyer’s swiftness to transfer the property, can influence the seller’s decision to vary the actual sale price, Khushalani added.
Set a listing strategy
The type of market determines the difference between the listing or asking price and final selling price, that is a buyer’s market (where inventory is high and demand is low) or a seller’s market (where stock is low and demand is high).
Zhann Jochinke, Chief Operating Officer, Property Monitor said that when it is a buyer’s market, a seller should list the property for sale, in line with the most recent comparable property that has been sold. And, if the market is experiencing ongoing price declines and rising inventory, then list it slightly below the previous sale to help move the property before the market falls further, Jochinke added.
Zhann Jochinke
Moreover, in a seller’s market, the inverse occurs. Here, Jochinke explained that the listing price would typically be a mid-single-digit percentage increase over the most recent sale for a comparable property.
However, Jochinke observed that this universal practice is not always followed in Dubai, as many brokers price property at whatever gets them the listing. “Looking at the historical practice in Dubai at-large over the past over five years, we have seen asking prices roughly 8 to 10 per cent higher than the final transaction prices for resale properties.”
How to factor in a ‘negotiation buffer’
“This is largely in part due to a mentality of building in a ‘negotiation buffer’ where the seller (and their broker) assume they will have to negotiate. However, a large negotiation margin is not necessary as this usually results in a property sitting on the market longer than needed.”
When determining the asking price, the broker should examine the recent sales of comparable properties and make adjustments for any factors that make the subject property more or less desirable, Jochinke advised.
Here’s how Jochinke illustrates this. “Consider a subject property of a 3-bed villa in ABC Community, the built-up area of 3,000 sq ft and plot size of 5,000 sq ft, with no upgrades.
“A broker would look for recent sales (the more recent, the better, but typically no older than six months) of other 3-bed villas in the ABC community of the same layout type, built-up area, plot size and condition.
“The three recent comparable properties are X, which is similar in all aspects and sold for Dh3 million. Y is similar in all aspects, except it has a pool and sold for Dh3.1 million. Z is similar in all aspects except it has a pool and upgraded kitchen and sold for Dh3.2 million.”
Review and adjust the prices
Examining the above factors, the broker should review and adjust the prices, considering the unique aspects.
“In this straightforward case, the X comparable is perfect, and no adjustments are needed. The Y comparable needs to have the added value of the pool, subtracted and revised down to around Dh3 million, and the same is true for Z, which needs to have a price reduction to account for the pool and upgraded kitchen, again let’s say roughly down to Dh3 million.
“So, here the broker should guide the seller with the realistic market value of the property, that is Dh3 million,” Jochinke evaluated.
Jochinke added that the market type and direction also need to be accounted for, whether it is a buyer’s or seller’s market and prices in the area are rising or falling.
For instance, in a real-time situation in the Dubai market today, it is most definitely a seller’s market in some villa and townhouse communities. Considering that, for this example property, the asking price could be set at around Dh3.15 million to Dh3.25 million (5 to 8 per cent above the last sales as adjusted), Jochinke explained.
Current market trends
Jochinke said that the established villa and townhouse communities have shifted to a seller’s market with available well-priced inventory scarce. “Asking prices are now routinely 5 to10 per cent above the most recent comparable sales. These are being snapped up quickly, leading to bidding wars or sometimes selling off-market as the listing broker has several clients waiting in the wings who are ready to buy immediately.
“There has also been a rise in properties coming on the market well above the most recent sales prices, sometimes 15 to 25 per cent higher. These properties are sitting on the market and mainly being ignored by buyers. The experienced brokers are helping sell properties that are correctly priced.”
Pricing for off-plan sales
Jochinke said off-plan or sales of completed units directly from the developer do not follow the same asking-to-selling price scenario. He added that the vast majority of developers do not negotiate on their asking prices.
“Instead of lowering the sales prices, developers offer incentives and concessions such as developer-paid DLD (Dubai Land Department) transfer fees (either the full 4 per cent or half 2 per cent). The other incentives are developer-paid service fees for 3 to 5 years, post-handover payment plans, furniture vouchers, and sometimes even non-property related add-ons like free cars or vacations.
“These concessions and incentives are essentially not free, but are baked into the sales price designed to maintain or even slightly increase a developer’s margin and protect the development’s value for all the initial buyers and investors.”
Generally, in the vast majority of apartment communities, the difference between asking prices and sales prices is still around 5 to 10 per cent. The final sales price is lower than the asking price.
So, the buyers must be armed with accurate data and knowledge to secure the right deal, Jochinke added.
Sale price lower than list price
Nick Grassick, managing director, PH Real Estate said until late last year the agreed sale price was typically lower than the list price, however, over the last three months selling prices have frequently been at a level greater than the advertised marketing price.
Nick Grassick
“We have seen property values jump by up to 30 per cent over the last quarter, partly fueled by simultaneous bids from multiple buyers resulting in sale prices higher than the advertised price. All major residential communities are experiencing a shortage of homes, this has sparked the rising market we now find ourselves in.
“This cycle in the market was always expected, home prices reach a level that owners are no longer prepared to accept, this results in fewer homes being advertised for sale, which in turn tips the supply/demand dynamic. The only debate to be had now is how long this rising market will last for.”