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Dubai - Lacklustre Bidding Sinks Property Auction

Global Arab Network - - Hannan Taha

Tuesday, 07 July 2009 17:40

A property auction by Sherwoods failed to lure buyers despite drawing a large crowd. The failure of the second such event in as many weeks also raised questions about usefulness of auctions to bridge the growing gap of expectations between buyers and sellers.

Dubai witnessed its first-ever public auction of residential properties last month. That auction had also found no takers.

The Sherwoods auction, held on the sidelines of International Property Show, had about 20 properties — a mix of ready offices, freehold villas and apartments, residential and commerical plots — on offer. But only ready properties and plots saw some bidding action on Thursday evening. But all the bids were deemed too low by the auctioneer, Jeremy Mayhew-Sanders, Head of Investments and Developments at Sherwoods.

“The lack of confidence on the whole auction process perhaps played a bigger part than I probably thought,” Mayhew-Sanders said. The company had to reduce the number of properties on offer from 50 to 20 as many sellers were unwilling to accept lower reserve prices proposed by the company. “We could not get to a level of reserve that we thought would be of interest to the market with the sellers. That (pricing) has been the key issue,” Mayhew-Sanders said.

High expectations of sellers amid bargain-hunting buyers seem to be the stumbling block for auctions to record a single sale. According to Mushtaq Ahmed, a Dubai-based businessman, properties with high reserve prices should not be in the auction market. His bid of Dh70 per square foot for a 6142 square foot villa plot in Dubai Land was the highest but did not meet the reserve price. “I came here to get a better deal. I don’t need to come here to get properties at market price. Why should I waste my time?” he said.

Another bidder, a Dubai-based Indian businessman, who wished to remain anonymous, suggested that the reserve prices to be disclosed beforehand. Although the organisers had given a guidance price on each lot, they had not disclosed its reserve price. “If there is a reserve price, they should declare it. I bid and thereafter they said there is a reserve price. I am confused,” he said.

According to Nesar Reza Khan, a real estate industry analyst, people are still being very cautious. “Properties above a million dirhams did not receive any bids. People are skeptical and are not ready to spend big bucks,” said Khan.

Expectations were high on Sherwoods to put lower-to-mid range properties on offer as industry experts felt that the absence of it caused the failure of the first auction. Madaniya Real Estate, the organiser of auction last month, had offered three villas and one penthouse apartment in upscale areas of Dubai. Only one property, a three-bedroom villa in Arabian Ranches managed to draw buyers’ interest. It received a highest bid of Dh2.3 million, which according to organisers was below the minimum price the seller was willing to accept.

However, Sherwoods auction did not offer lower-to-mid range properties. “It is very difficult for the first time to decide what mix you should offer,” said Iseeb Rehman, Managing Director of Sherwoods. “This now gives us an indicator of what the market is leading to. Hopefully, you will see a very different mix in the second auction,” he said.

Global Arab Network

Aruna Urs, khaleej Times

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