Gazumping has resurfaced in Dubai with property sellers now backing out of deals as they expect prices to rise sharply in the coming months.
With the UAE being the favourite nation to win the bid to host the World Expo 2020 in Dubai, the property market is expected to continue to make gains.
“We are seeing a number of sellers backing out of deals as they are confident that property prices will rise post November.
“One of the reasons for sure is the World Expo 2020, but in general the market sentiment is positive,” Parvees Gafur, Chief Executive Officer, PropSquare Real Estate, told Emirates 24|7.
Abdullah Shaikh, a Saudi national, who has been investing in the property market since the beginning of the year, said: “My deals on the Palm did not materialise as the seller asked me to pay an extra Dh100,000 per apartment.”
He added: “The deals were being closed till a few months back, but since September sellers are holding back as they expect a sudden jump in prices before year-end.”
Last week, Knight Frank, a UK-based global consultancy, said house prices in Dubai surged 21.7 per cent in the past 12 months (ended June 2013).
“Dubai leads the annual rankings, recording price growth of 21.7 per cent in the year to the end of June.
“The emirate’s housing market has gained momentum since late 2012, while its prime market led the way, mainstream prices are now following suit,” the research firm’s latest report said.
Earlier this month, Standard Chartered said that despite prices soaring Dubai's property market is not heading towards another crash with market now more sustainable, being influenced by an improved economy rather than speculation that will not repeat the same boom-and-bust cycle of 2008.
Paris-based Bureau International des Expositions will vote to decide which city will host the World Expo 2020 on November 27.
New buyers’ on alert
Generally, it is the new buyers that are facing this issue as they are not aware of the penalty clauses that need to be included in MoUs.
Property agents say that sellers are perfectly within their rights to increase the price if a MoU hasn’t been signed, but they do face stiff penalties if they have inked MoUs.
In 2011, Emirates 24|7 reported gazumping to be rampant as sellers were expecting an imminent price recovery, which proved correct with the emirate witnessing prices rise of over 20 per cent year-on-year.
Gazumping involves a seller pulling out of an agreed sale after accepting a second, higher offer – or asking for more. The term was first coined in the UK in the late 1980s and early 1990s when property prices were buoyant.