Property flippers start to spin

From Arabian Business, 11 March 09

If you want to hear positive news about the housing market, ask an estate agent.The Middle East is hamstrung at the moment with a lack of reliable facts on which to base house buying decisions.For example, Ryan Mahoney, managing director of estate agent Better Homes, was not alone on Tuesday when he painted a rosy, but misleading picture of the market.

He says that buyers are coming back to the Dubai real estate market, leading in one case to an “unprecedented” 16 viewings of a single property one day last week.I have no reason to doubt his statement is true, but he fails to say whether the property in question actually sold. I suspect not.In fairness to Mr. Mahoney, he goes on to say that there is a lot of shopping around, and appears to concede that most people are only browsing rather than buying right now. This is inevitable in a market where the credit crunch prevents virtually everybody from securing the mortgage they need to buy a home, and prices are still falling.

Mr. Mahoney needs to be careful that his marketing messages do not overstep the line into counterproductive spin. His assessment that property prices have fallen by up to 50 percent in some parts of Dubai is a helpful guide from somebody with firsthand knowledge of the market. But going on to say that buyers can secure up to 15 percent more off the asking price as they close a deal shows an estate agent’s classic instinct for self-service. The fact is that lowball offers of 50 percent below asking prices are being offered and accepted, even in today’s market that has already seen prices halve since their peaks last summer. Better Homes would be shocked and delighted if a mere 15 percent discount was all that was required to seal a deal.

Any economic recovery will be delayed while there is a vacuum of reliable information. Nobody wants to invest in a declining market, but money could flood back once the economy finds a solid floor.Mr Mahoney needs to be careful that his faux-optimism doesn’t elongate the current downturn and should speak sincerely if he wants to stimulate sustainable demand.