Growing demand for villas in Dubai is resulting in a new problem for real estate brokers - owners are cancelling agreements at the last minute in the hope, or in some cases, in the face of better offers.
The tendency, agents say, is more among villa owners in Springs, Meadows, Arabian Ranches and Jumeirah Islands, where prices have gone up in the past three months.
Stock in some of these villa communities is “quite” limited, resulting in a gazumping tendency among sellers.
Property agents generally tend to sign an “informal” agreement with the seller that allows them to market and sell the property at an agreed price.
Because the agreement is not a legal one, it is not binding on the seller, who tend to hike prices at the time of inking the formal agreement with the buyer.
“There is renewed interest from investors for completed villa projects. Sellers are thinking that they would get a better price and so refuse to sell, citing any stupid reason,” a property agent, working for a top real estate agency, told this website.
He claimed two deals fell apart in the last one month after property owners in Meadows and Springs sought a higher price before accepting the down-payment.
“The sudden price hike was ‘too’ much for my client. His pre-approved mortgage was not sufficient enough to cover this increase,” the agent said.
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.
In March, Asteco, a real estate consultancy, said Springs remained the most popular among villa communities, witnessing a price surge of 8 per cent to Dh7,550 per square metre. Prices in Arabian Ranches jumped 7 per cent to Dh8,600 per square metre, while Meadows rose six per cent to Dh9,700 per square metre.
Earlier this week, Cluttons said villa stock in Dubai had seen optimistic gains with the best performing developments being The Lakes (up 7.2 per cent since Q3 2011 ), The Meadows (6.4 per cent) and The Springs (6.4 per cent).
However, agents say they are finding it difficult to distinguish a “genuine” seller from one who is merely approaching them to know the possible worth of their property.
“The sellers do sign agreements with us, but since they are no legal standing, we can’t force them to honor their commitment. We can just backlist them, but as the stock of ‘quality’ villa is less, we can’t even do that,” the agent stated.