Emirates City Forum

Buyers are now only interested in properties in downtown Ajman city. Rich-Joseph Facun / The National

Confidence in property developers in Ajman has slumped so low that the value of off-plan homes in the emirate is now impossible to determine, brokers say.

Buyers simply do not trust developers to complete about 900 towers proposed for a dozen suburban developments along Emirates Road, where construction has yet to start more than two years after the projects were sold.

“Now, there are people offering properties at Dh300 per square foot on Emirates Road, but nobody is interested in buying anything because there are a lot of properties and towers that you are not sure if they are going to be developed or not,” said Mohammed al Zarah, the vice president of Great Properties, a Dubai-based broker. “It is all about trust now.”

Overall, house prices in Ajman have fallen by 30 to 50 per cent.

“There is no real price level today in Ajman,” said Mehmood Yousuf, the director of the broker Minarat Properties, who is also a developer. “Since there is no buyer for off-plan properties any more, the price is whatever a potential buyer says it is.”

Prices had doubled in the first half of last year to peak at about Dh675 per square foot in certain areas. Today offers have fallen as low as Dh299 a square foot.

Ajman became a popular choice for buyers on a modest budget because prices were much lower than Dubai. Ajman is less than an hour’s drive from Dubai.

Buyers today are interested only in properties in downtown Ajman city which are completed or close to completion. Still, prices for those projects have fallen back to the levels at which they sold at launch. For example, Al Khor Towers fetched Dh220 per square foot when it launched in 2005 and is now selling at Dh250. Last year, this same property reached Dh400 per square foot, a broker said.

“The most popular projects are those near completion within the city like Horizon Towers,” said Roger Wilkinson, a broker specialising in the Northern Emirates and founder of the website www.ajmanproperty.com.

“Units there are selling now at about Dh320 and were launched at Dh275. The Corniche Tower, which has already 35 floors [out of 52 total], was launched at Dh395 in 2005 and can be found at Dh500 today. They had reached Dh800 per square foot.”

The projects along the Emirates Road have suffered the most. “We have not closed any deals in Ajman during the last two months whereas we used to sell a lot there,” Mr al Zarah said.

Transactions for land plots have also stopped, and asking prices have dropped by half.

“In Ajman, the plots on Emirates Road are at around Dh50 to 70 per square foot compared to 100 at the end of May,” he said. “Plots with a sea view in Ajman Marina are less than Dh165, compared to Dh305.”

Limited transparency about project development and the financial position of several developers has contributed to the crisis of confidence in the market.

One development on Emirates Road known as Marmooka City, which alone was intended to feature 200 towers, was taken over by the Ajman government in February in an effort to restore confidence.

Marmooka City had suffered from uncertainty over ownership, defaults by developers, lack of infrastructure and falling prices since the Government sold more than 200 plots covering 70 hectares to developers.

Some developers have defaulted on payments for land and are insolvent, while in some cases developers claim the Government has failed to hand over land as agreed. Many buyers have walked away from their commitments because of falling prices and lacking confidence.

Several developers sold units with promises of huge short-term gains, sometimes backing these promises with post-dated cheques. In some cases these cheques have bounced and at least one developer is being sought by police.

Mr al Zarah said he would not advise clients to buy in Ajman until a clearer picture emerged.

“I am not buying anything in Ajman unless I know the new strategy of the Government and the developers – which project is being cancelled or put on hold,” he said. “It is not about prices. It is all about trust.”

To help bring some transparency to the market, a new regulatory body, the Ajman Real Estate Regulatory Authority (ARRA), was started earlier this year. Developers are now required to register with the authority and transfer all the money received by buyers to an escrow account. Such regulations are expected to help restore confidence in the market.

Mr al Zarah said the creation of the regulator was a positive step. “But in Ajman there are mainly small developers,” he said. “I know a lot of them who already spent [investors’] money to pay for their plots or to invest outside. Master developers should hold developers’ payments for land for at least two years. This is the only solution to keep developers in Ajman.”