Real estate adverts have overwhelmed customers

Real estate ad-spend, which drives the revenues of the UAE's advertising sector, is unlikely to see a downturn anytime soon, says the president of the International Advertising Association's (IAA) UAE chapter.

Sami Raffoul, who is also the General Manager of Pan Arab Research Centre (Parc), says industry professionals have been repeating the magic word "real estate" continuously as the major advertising spending sector in the UAE.

Real estate advertising not only dominates ad spend, it has also made a major contribution to the advertising rate increase, some experts say.

According to Raffoul, real estate advertising has become powerful in the past year and will continue to flourish in the local advertising market for the next few years.

In 2007, real estate ad spend reached $237 million (Dh869.7m), taking in 18 per cent of the total ad market, according to Pan Arab Research Centre yearly advertising spend report.

 

Why has real estate become the major advertiser in the UAE market?

Real estate is a sector that progresses and needs time to develop. It does not happen overnight. Generally, a construction project needs one to one and half years to be completed from start to finish. Today, many of the projects announced in the past two or three years have become a reality and have matured. The promoters need to go to people to announce what has become a reality.

Meanwhile, the escalation of ad size has become noticeable. From the use of a quarter page and half a page, now anything less than a full page or a double page spread or even a quadri-page spread means nothing. The escalation is a result of what is called "share of voice". Two years ago, the real estate market consisted of a few big players. Last year, they increased by a dozen. This year, they have risen by another two dozens. Added to that, real estate developers have diversified their scale of operation. The geography has changed. Builders in Abu Dhabi, Ras Al Khaimah, in addition to projects around the GCC, have emerged.

Advertising has also become a way to rectify the image of property developers who in the past had failed to fulfil their promises.

Isn't advertising another element of the competition among real estate player to attract buyers?

I am not sure they are attracting people. Most of the people residing in the UAE cannot afford 10 per cent of the prices offered. This means the real state stock on display is so highly priced, that the buyers will have to take up mortgage for 20 years or so. However, this does not mean that real estate is heading towards a recession. Some industry experts say that two thirds of real estate buyers do not come from the local market. The majority of the target audience is abroad.

Does the real estate sector fear that people will cease to buy property in the future?

No, the situation is even more complicated. The current pressure put on advertising by the real estate is caused as a counter-effect to the world slump. With the credit crunch in the United States, the largest single real estate market in the world, real estate is dropping to unprecedented levels. This has now occurred in most of Europe. Mid-priced real estate is going through the same path. In addition, the price of oil going totally out of control has also caused a drop in transportation so vehicle sales have fallen 20 per cent in the US, the largest market for cars. And that impact will be felt in Europe.

Developers in the UAE are caught in this period of the world that is going through an unknown turn of events.

We do not know how people will react.

While other countries outside the rich oil zone are affected by these global changes, some local real estate developers are racing against time because they do not know what is going to happen in the next six months and they want to rid themselves of the stocks to avoid the risks.

Let me explain this, there are four different types of developers and projects.

- Incubated projects that have reached maturity and are about to be delivered. They need to be sold very aggressively.

- Projects that have just been announced and are trying to elevate their "voice" to attract the cash rich people to commit their money in those projects. 

- Major local players such as Emaar, Nakheel and others who are developing projects in the UAE. For these players nothing will change as they will not feel affected by the global real estate developments. Such players will continue doing business and promoting their operations through advertising, while looking at various opportunities to launch new projects in countries such as Saudi Arabia, Morocco and others. 

- Developers who are apprehensive of the future, wanting to race against time to secure themselves out of the risks of the future.

The result is too much advertising on the real estate business, mortgage and home loans.

Are there any negative impact on the advertising market as a whole?

The excessive mode of advertising is causing a sort of wallpaper effect. People who are interested in construction, new building material and techniques, or who are interested in buying property, may read an advertisement. Usually, those do not consist of more than 20 per cent of the total audience. The rest are so overwhelmed by real estate advertisements that they skip through and lose a chance to view other types of products.

Do you expect real estate advertising ad spend to decline with new projects being completed and sold?

No, I do not expect the real estate ad spend to fall. It is difficult to say what would be the cut-off time. Advertising is not the only vehicle to sell property. Many developers depend merely on reputation and word of mouth to promote their projects. Others fail even with huge advertising budgets due to inadequate communication and misinformation. Advertising is a way to build an image.

The IAA has called for a code of ethics among members of the advertising community, yet real estate advertising has challenges of backing up the accuracy of data and information, which impacts industry trends. Where does the IAA stand in regards to these challenges?

IAA has a code of ethics and all members apply it trying to be truthful, correct, make promises that can be fulfiled, use language that communicates correctly and imagery and graphics that correspond to the local culture, which includes the nationals as well as expatriates residing in the UAE.

Yet, some advertisements may fall short of compliance with the regulator, including the Lands Department and the Real Estate Regulatory Authority (Rera).

Rera has recently set strict rules for the advertising of real estate due to complaints received by the authority about certain misgivings. Such misgivings are not induced by advertising professionals, but rather due to lack of information, change of regulation or inadequate illustration of the advertising material presented.

I believe that Rera's intervention is extremely successful and welcomed to avoid ugly surprises that damage the reputation of the UAE, which takes pride in its booming economy.

The Dubai Government has had a very successful role in introducing a discipline in the business of marketing or advertising of real estate and I think other emirates will have to follow suit.

On the other hand, advertising agencies have no clue about how to verify true information.