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19 March 2024

Eight properties up for grabs on Wednesday

The auction on Wednesday will include two four-bedroom apartments in Jumeirah Beach Residence. (EB FILE) 

Published
By Parag Deulgaonkar

Although the previous two property auctions in Dubai failed to record sales at the venue despite a high turnout, Madania Real Estate and Sherwoods Independent Property Consultants – the two licensed auction companies – are set to hold their second show.

Madania will hold its auction on Wednesday, while Sherwoods plans an October-November show.

"We plan to auction eight properties on July 22. Up for auction will be two four-bedroom villas in The Meadows; two four-bedroom apartments in Jumeirah Beach Residence; a single bedroom apartment in International City; and three commercial offices spaces in Jumeirah Lake Towers," Raymond Kuceli, CEO of Madania Real Estate, told Emirates Business.

Jeremy Mayhew-Sanders, Head of Investment & Developments, Sherwoods Independent Property Consultants, said: "We are already talking to sellers about our next auction, but it is too early to commit at this stage. We would like to target a similar number of properties, about 20 to 30 units and it should be a mix of residential and commercial property – vacant and tenanted."

Both companies maintain launching online auction is not their priority, Sherwoods and Madania believe investors will embrace the auctioneering method but will take some time to become an accepted form of sale.



When are you planning to hold your next auction?

Kuceli: Our second auction will be on July 22 at the Al Marooj Rotana Hotel.

Sanders: We plan to hold our next auction in October/November. In reference to our first auction, we were not expecting to sell on the night. But there were some positives. The first one is that we did actually achieve a sale immediately after the auction – a direct result of the auction. We were about Dh60,000 adrift on a penthouse lot in Emirates Crown and it was concluded. The transfer has already taken place, at Dh6 million. So we achieved our first sale.

What have you learnt from the last auction and what changes will you incorporate this time?

Kuceli: As the first event of its kind, the auction was always going to throw up a number of learning points. In terms of the market, the first event proved that a big gap exists between buyers' and sellers' expectations, which reflects the state of the market currently. We have an important role to play in educating the market about the difference between distressed and willing sellers, as bidders need to recognise the difference to make appropriate bids. In terms of our internal processes, I was pleased with my team's work, but of course, we are always looking at ways to improve. We will learn more as we continue with the programme and I have complete faith that sooner or later we will see greater success with the process than we witnessed at the first event.

Sanders: We did manage to get shy of 200 people to the room, which was very encouraging [and very few of them were agents]. Immediately after the auction we were bombarded by people who had questions on the lots and general questions about the auction process, and that was encouraging.

But having said that we are under no illusions. There is some way to go in getting people to feel comfortable with bidding in the room. We can manage this next time by a longer marketing period running up to the auction and spending more time explaining the process to potential buyers.

Buyers need to carry out thorough research and due diligence prior to the auction [which is a good thing], so they can bid with confidence. Better to make an offer or bid in an auction room knowing exactly what your buying, the finance pre-approved, etc., than finding out after a signature on an memorandum of understanding (MoU).

Other main issues remain pricing and confidence in the property market generally. However, these issues are not restricted to the auction room. We did our best to offer lots, which were competitively priced; some lots we managed to get a good flow of bids and got close to the reserve set by the seller. On other lots, we were quite far away from the reserve level. Next time we will have to really focus on this and use the market knowledge we have to get realistic reserves. It's an education for sellers as well, if they like it or not.

In the last six months or so it has been our biggest challenge, chasing a falling market but, hopefully this is coming to an end. By the end of summer we will experience a settling on pricing, and both buyers and sellers [and agents] will form a view on where values lie. Our next auction will certainly include a greater choice of low value units. We tried this time, but failed to get the inventory at prices we felt confident about. Our other main focus will be to get more inventory with income, both residential and commercial property let to tenants, which will hopefully appeal to the investor market.

How many properties will you be auctioning this time?

Kuceli: We plan to auction eight properties on July 22. Up for auction will be two four-bedroom villas in The Meadows, another two four-bedroom apartments in JBR, a single-bedroom apartment in International City and three commercial offices spaces in Jumeirah Lake Towers.

Sanders: We are already talking to sellers about our next auction, but it is too early to commit at this stage. I think we will see out the summer months and start to focus in earnest in September. We would like to target a similar number of properties, about 20 to 30 units and as said above, it should be a mix of residential and commercial property both vacant and tenanted.

Do you believe investors are not mature enough to understand the importance of auction?

Kuceli: No, I have faith that investors will embrace the auctioneering method and that it can become the market indicator it has the potential to be. This will happen naturally as the market matures further, but it will be accelerated as buyers and sellers become more comfortable with the process, and develop a greater understanding of it.

Sanders: We do think sale by auction has a place in the UAE property market although it might take longer than we thought for this to be an accepted form of sale.

The current system of buying and selling accompanies gossip, rumour and hearsay. It can get very messy with multiple agents/middle men involved in one transaction. You can't hide behind the auction process, it is open for all to see, pricing is transparent, it's quick, and the property will achieve the best price in an open competitive environment.

So I do believe there is a need for this. Auctions will work, of that I'm in no doubt, and we have no choice but to go through this initiation stage. Current market conditions are still a concern – whether to sell by private treaty or auction – and the main issue to work on is the gap between buyers and sellers expectations.

Does auction help distressed sellers?

Kuceli: The auction process can have a positive outcome for all parties, and this is one of the key goals we work towards as a company. The auctioneering method is transparent and acts as a catalyst for action. This benefits not just distressed sellers, but also willing sellers.

Sanders: Absolutely, if a seller is truly 'distressed', then my interpretation is that a sale needs to take place. A sale by auction should in theory offer them the best platform to achieve a quick sale at market rate. And you can say this with confidence, provided the property has been sufficiently marketed and advertised for sale and then persuading a number of genuine buyers to attend the auction.

Do you expect authorities such as Land Department/Rera to back your efforts through more legal framework?

Kuceli: We have worked closely with the Land Department and Rera to ensure that we follow the necessary procedures. As a company we are open and transparent about our processes and have involved the necessary regulatory authorities at every step of the way. In fact, we were happy to recently provide information on our best practices and benefits of the process for the regulator's publication.

Sanders: There are issues but these will be addressed and hopefully ironed out. Sale by auction offers a different 'method' of sale to the private treaty route but the mechanism and 'paperwork' are the same.

For both methods a broker needs to carry out the same due diligence on the seller and the property. Terms of instructions are similar, the property details are similar, the marketing campaign is similar. Instead of negotiating with one or two persons over the telephone or in person, we are standing on a 'bo' inviting offers from a group of people. The highest bidder wins, but then the sale is concluded again in the same way. An MoU between buyer and seller is signed and then there is a period to transfer in which any other conditions can be fulfilled. Conditions are clearly spelt out in the MoU as you would expect and if conditions are not addressed then transfer does not take place.

Do you have plans to hold online auctions?

Kuceli: At this stage our focus is on bringing the auction method of sale to Dubai and ensuring it is successful in public auctions. The online method of auctioning is an extension of this and while it may be something we expand to in the future; but it is not a priority at the moment.

Sanders: Yes, but not this year. We might be able to introduce telephone bidding by November, but we'll wait and see.

Are you coordinating or talking with licensed auction companies using a combined effort to make the process successful?

Kuceli: At this stage we are not collaborating or consulting with other property companies about the auction process in Dubai. We believe that we have the skills and experience in-house to make this method of sale succeed in Dubai.

Sanders: We are currently not talking to any company.

 

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