Global economic recession hits Ajman property market

Global economic recession hits Ajman property market

The global economic recession is unique in that its effects have been universal. No country has escaped its impact and UAE is no different. But the effects on the UAE economy have more or less been minimal when compared to the US or Europe. The Gowealthy Research Team has evaluated Ajman property sector and we find that the current financial crisis has had an adverse impact on sales, the result being a severe undervaluation of properties.

A majority of projects in Ajman are either off-plan or under construction. Properties that were being sold for AED 600 - 700 per square foot a few months back are now being disposed of for less than AED 400 per square foot. The sudden drop in sales and the subsequent fall in prices could be attributed to a widespread fear and panic among investors, created by the ongoing financial meltdown. It has been compounded by local banks that have tightened credit rules and hiked interest rates. Most developers in Ajman are looking to finance their projects through off-plan sales and the drastic reduction of sales has hit them hard. The abrupt halt in scheduled payments of purchased properties and lack of takers for new projects are having a catastrophic result on the Ajman property sector.

Another reason for buyer reluctance is the belief that liquidity crunch would slow down infrastructure development in the emirate. Current infrastructure developmental activity in Ajman includes Power and Water generation. Speculating that recession would delay work in these areas, investors are shying away from investments in Ajman. To tackle the issue, AED 1.38 billion has already been allocated to develop roads, bridges and sewerage systems; work on these projects is already under way. In addition, the government has signed an AED 7.34 billion deal with Malaysian Mining Corporation (MMC) to build the first coal-fired power plant in the region, which will be operational by 2012.

Notwithstanding the recession, we still rate Ajman as ideal for real estate investments. As the effects of the financial crisis wear off on the UAE economy forcing companies and residents to cut down on expenditure, demand for inexpensive housing will go up inordinately. Taking into account the growing shortage of reasonably priced properties, we expect prices in Ajman to hike again in mid 2009.

Furthermore recession has made Ajman market more competitive. To woo prospective buyers, developers are offering multiple incentives likes zero initial payment and extending the number of installments besides furnishing the properties. All these are signs of the market gradually becoming buyer-oriented, rather than being dominated by sellers. With Ajman government soon to formulate a body like Dubai's Real Estate Regulatory Agency (RERA) in early 2009 to monitor realty transactions, we believe that the time is ripe to invest in Ajman property, more so in the wake of softening prices.