Some real estate agents in Dubai have resorted to charging commission fees to both buyers and sellers in a bid to bolster revenues that have fallen by nearly two-thirds, industry sources said.
Agents who raked in profit at the peak of Dubai’s housing bubble are now doubling up on fees after monthly real estate transactions in the Gulf emirate fell 70 percent from the boom of 2008.
“The fee charged by agents is two percent and this fee is the responsibility of the buyer,” said a Dubai-based agent, who asked not to be named. “What has changed is the opportunity for agents to earn from both sides, as sellers who are keen to dispose of their property can also pay.”
The practice is not illegal if both parties are told of the charges, the agent said.
Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments. Between 2007 and mid-2008 prices in the emirate rallied almost 80 percent, according to Morgan Stanley.
Agents selling during the city’s boom years could earn up to AED250,000 a month as speculators flipped properties and pushed up prices, said Priyesh Patel, real estate agent at Aston Pearl Real Estate.
“In the years of 2007-8 you could expect an average agent to take home between AED50k-80k per month and the better sales agents would take AED150k-250k per month,” he said.
But the collapse of the housing market in late-2008 saw property prices more than halve, and a slew of luxury real estate projects cancelled – which slashed the earning capacity of agents.
“[Now] we are left with better and honest agents whom now still can take home AED30k – 60k per month but there is a lot of work and hours involved these days, whereas before we could earn sitting at our desks,” said Priyesh.
“Commissions have always been fixed at two percent of the selling price but if we remember back to 2007-8 the selling price was much higher. Nowadays, we still charge two percent but selling prices are much lower.”
Tom Bunker, an investment sales consultant at Dubai’s Better Homes, said the practice of charging both the buyer and the seller was prevalent in the market but “not the norm.”
The value of real estate sales in Dubai in the first ten months of 2011 were down 85 percent compared to the same period in 2008, Land Department data shows.
The city saw less than 1,700 real estate deals in the first ten months of the year, a 70 percent decline on sales made at the housing market’s peak.
House prices in Dubai showed signs of recovery in the third quarter, with slight rises in prime projects such as Palm Jumeirah and Arabian Ranches, Jones Lang LaSalle said in September.
Property recruitment specialists Macdonald & Company said in September that average salaries of real estate professionals in the Middle East had fallen to just under AED38,000 per month.
Its annual salary study showed that the average base salary was AED37,965 per month ($10,335), compared to last year’s figure of AED38,351 per month.
Nearly a third of respondents received an increase in their base salaries this year, up from a quarter in 2010, the report said.
The average annual bonus rose to AED76,431 from AED73,246 in 2010, a 4.4 percent, with 40 percent of respondents saying they had received a bonus in the last 12 months.