August 16 2009

The luxury property sector in Ras Al Khaimah (RAK) has recorded a price decline in the range of 25 to 40 per cent in the past one year, according to a real estate agent.

Paid prices of Royal Breeze apartments in Al Hamra Village have dropped by 40 per cent to Dh615 per square foot from Dh1,030 per sq ft a year ago. During the same period, prices in Bab Al Bahar villas dropped by 33 per cent to Dh800 from Dh1,200 per sq ft.

The Cove Chalets, which were priced at Dh1,440 per sq ft a year ago, are down 34 per cent and are now selling at Dh950 per sq ft, said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

According to Sherwoods Property Consultants, prices in Al Hamra Village have dropped to Dh700-Dh800 from Dh1,200 per sq ft.

"The one-bedroom Cove Chalets were selling for Dh1.5 million in February this year and is being sold now for Dh1m," said Annette Evans, Head External Communications, Sherwoods Property Consultants.

Simone Lawrence, Operations Manager, Northern Emirates, Better Homes, said the asking prices in RAK have fallen steeply in the past 12 months.

"However, the asking price is not always reflective of what people are willing to pay and does not mean the property will sell. Properties that have resulted in a sale in the past six months have usually been for below their original price."

Peter Penhall, CEO, Gowealthy, said: "Like most of the local real estate markets, prices in RAK too has taken a significant beating and will probably continue to do so into the near future considering that the majority of units are still in an 'off plan' stage and hence are not drawing the appeal that they used to. However, developments will continue to offer good value propositions as prices start adjusting towards the lower end of the current pricing curve."

He said the reduction in the costs of developments over the past nine to 12 months will ensure that the losses suffered by the developers in this region are somewhat tempered or reduced.

"Many 'wise' developers should have renegotiated their construction contracts. The estimates of losses incurred by RAK's developers would depend on the individual developers and their cash flow situation," he added.

Alwadiya said the crisis hit all developers across the region, and RAK has not been an exception.

"Having said that, due to the fact that most of the RAK projects were overshadowed by the mega Dubai and Abu Dhabi projects, the inflation of the prices in the emirate was not as rampant as elsewhere in the UAE," he said.

"Sales of development properties have been stagnant during the past six months and this is not expected to get better soon. In addition, the RAK electricity crisis is expected to leave many of the buildings unoccupied. These factors will definitely impact the profit margins of the emirate's developers and their future growth plans."

Lawrence said: "The actual losses can't be estimated of the developers in RAK as they vary from one project to another. However, the cost of developing projects in the emirate was much lower compared to developing projects in Dubai or Abu Dhabi. This factor provided a good shield for the developers that invested early on in the emirate and followed very realistic sales strategies and aggressive development programmes."

According to Penhall, the current real estate market in RAK is "very quiet" and is anticipated to remain that way well after the summer break is over.

Lawrence admitted that the buyer demand in RAK is quite low at the moment. "If sellers are wanting to sell, investors are usually interested if the property is completed and selling for its original price or below. This may change after the summer."

Alwadiya said: "The majority of the projects that were announced during the past few years are still in progress. Obviously the global economic crisis has forced all developers to re-time their project schedules, future expansion plans and instead follow a more cautious approach. The global demand for luxury holiday homes have decreased dramatically and this has definitely affected the plans and performance of the projects underway in RAK."

Penhall believes RAK has the advantage of having several of its developments well planned, but those developments that do not fall under the "luxury" category will continue to suffer, as the emirate itself has a substantial way to go in terms of overall offerings and infrastructure implementation.

According to Evans, Sherwoods was recording an average of five sales transactions every month for RAK and the soon-to-be-held America's Cup for sailing in the emirate will certainly trigger more interest into the emirate. "We are currently seeing investors looking for holiday homes. There is a growing percentage of people owning and living in RAK and they are wealthy people."

Al Hamra Village, Al Marjan Island, The Gateway City, The Cove, Blue Mirage, Santorini, Bab Al Badr, Jebal Jais Mountain Resort, The Quay, The Banyan Tree Desert Resort and Mina Al Arab are some of the luxury developments currently going on in the emirate.

Evans said: "There are 400 villas in all in The Cove. About 90 per cent of these villas have been taken up by Rotana Hotel to be used as hotel villas and only the rest of them are in the secondary market for sale."

Lawrence added: "The main developments in RAK all have an upmarket feel to them due to their location by the sea. The soon-to-be-completed Granada Villas part of the Mina Al Arab development are also well finished upmarket villas."

Analysts said so far no projects have been cancelled in RAK?except for the La Hoya Bay, which has been put on hold.

"The Granada Villas in Al Hamra Village is to be completed at the end of this year and quite a few other developments are scheduled to be finished or partly finished next year including the Bab Al Bahr resort on Marjan Island," Lawrence added.

Alwadiya said: "With the establishment of the escrow accounts in Ras Al Khaimah, banks such as Badr Al Islami – Mashreq, Bank of Baroda, Commercial Bank of Dubai (CBD), Abu Dhabi Commercial Bank (ADCB) and Dubai Islamic Bank (DIB), have signed agreements to offer escrow accounts for projects in the emirate."

Better Homes said the main interest into RAK's property sector is coming in from Europeans living both within the UAE and in their home country, while Harbor believes the majority of investors in the emirates have come from European countries including the UK, Germany, Spain and Russia.

"In addition, a sizable portion of the wealthy Dubai and Abu Dhabi residents have also seen the potential in the emirate," Alwadiya added.

Source: Emirates Business 24/7