IMF warns Dubai over new real estate bubble

MGBWM

Dear Real Estate Policy Maker

Dubai is boiling and overheating again. Some of us managed to survive the first time four years ago...I had to commute between dubai and Kuwait to maintain a family living in dubai...such scenarios can't work out every time...I know many others who were not half as lucky as I was.. They had to leave for good.. This time majority of us will move for good...simply we can't take two hits that fast and all because you are watching us overheating with interference to rescue a market that has finally reached balance and again you leave for those monopolistic cartel players....

fayssal

Dear Dubai, Dear Forces of Supply and Demand,

No one is asking for the real estate market in dubai to be "cheap" or to lower the socio-economic class of dubai residents, yet when the average two bedroom goes back to 100,000 Aed, this is either a policy issue, a demand issue or a supply issue.

At this stage, we know there is high demand, there is restricted supply which can be loosened up, so we can only hope that policies ease supply so that rents can be reasonable again, and by reasonable i still mean expensive but, well at least, affordable to a middle manager making more than 80% of the population.

Soon, and unless you are on an expat package, you will no longer be able to afford anything above a one bedroom, its a sad that such an amazing life in this country can be dampened by its housing pressures.

So fingers cross for supply and demand to have mercy on us.

Mohammad

Where is the end user buyer in the market? Answer this question then you will know where is this market going.

Shakri

How would Property company shows profit. Sell future projects show that revenue on them before starting to build any of them. The problem will be in how to maintain that profit if you will actually spend money to build these projects? The money is already accounted for !

desert dream

IMF should focus on sorting out their own affairs. There is no chance of a bubble, in fact we are only in the initial stages of recovery. The very fact that over 85% are cash buyers sets the tone. The low interest rate scenario is another factor. There are no new master developments, now JLT, Marina, Downtown are maturing and new towers are getting launched. Things have never been better for Dubai Property. The next 3 years will be outstanding.

I love Dubai

Boom, Boom, Booming.
Where are the Jobs, Why Dubai based organizations are still cutting on expenses as well as staff, why salaries are revised, why Nationals to be treated differently for opportunities if market offers great. Remember what is the contribution of Locals in Property Market, can they play role to cause increase of decrese in the Property Market. NO.
So its expats living in UAE or outsiders finding it safe heaven, but for how long....What Next, is it sustanable, can one survive on paying such high rents for couple of months without Job.
I love Dubai, It is my home outside my country, but things need to be mature, controlled, helpful and remain Peace of Mind.

The Consultant

I think you will find that making economic forecasts about the nations of the world is very much part of the IMF's "own affairs".

The rest of your post could easily be a cut n' paste from 2007 - in fact there are so many posts like this these days we could just adopt a bit of shorthand "*CNP2007*" would probably do it...

Remember also that at the peak of the market the dollar (and hence the dirham) were heavily undervalued and some people were using Dubai property as a currency play as much as a real estate investment - so in (for example) Rupee, Sterling or Euro terms any given AED price is now anywhere from 15% to 50% more expensive than it was in Q1 2008, making the peak prices achieved then even more remote than when analysed from the perspective of a non-USD foreign buyer.

Jake

Firstly, denying a bubble in the same statement you mentioning an outstanding performance for a span of 3 years is rather contradicting itself. Then you go on to mention that 85% of the buyers are doing so with cash is another indicator for your return of the bubble. Where is that cash coming from? Why would they park it here? surely these guys aren't the enduser anyway, those individuals were put off by how the crisis was managed. Lastly, there hasn't been much change in the regulatory framework that could prevent the next bubble from happening, so your desert dream could be rather short lived. Looking at the rental market, the next 3 years could be really tough for the majority of the population.

Mark

Mmmmm, our Government seems to disagree with you Desert Dreamer, they are changing the laws regarding 'flipping' because they are worried about another bubble in the property market with all the new maga-projects about to start.

Billy

I would hazard a guess they know more about it than you do. Typical response from someone who does not understand just how much of a mess Dubai is in and that the rest of the world looks on laughing.

JustCurious

An what would be the business of the "International" monetary Fund?
Sorry, i did not mean to wake you up. You can bury your head in the desert sand and keep dreaming

simon askew

Of course for the small percentage of investors who are wealthy using their own money it'not a problem to buy properties and hold out for unrealistic rents,but the problems are in other areas for creating a stable civilization.
1. The lower banded workers having to share in unexceptable numbers apartments using most their income to give to the owners so not giving any chance of improving their life conditions ,or supporting familys back home.
2. Their is not a balanced variety of rents to reflect areas and make sure quality housing is available to all to have a basic standard family life(not live like cattle in a pen)
3.Money funding unrealistic pricing from various banks and investors ends up unpaid hence using peoples taxes in other countrys to clear debt and construction companys and fm companys either don't get paid or are not paying workers a fair wage.
4.Workers in the country only stay a few yrs because they cannot sustain life hear under such unrealistic pricing .

SAM

@Louie, you have this specific information that a crime is being committed and you do not inform the police; instead you blame the authorities for inaction, and you expect readers to believe that your concern over deporting low paid workers is genuine?

Louie Tedesco

You are spot-on with your comment on overcrowding of many residential units by low paid staff. We have a housemaid service one day per week, hired from a reputable firm who charges Dh 35 per hour. Reputable, so we thought. There are 12 housemaids sharing one bedroom in an employer rented villa. Probably 50 living there in total? Of course this is all illegal, just like working 2 hours less in Ramadan is the law, yet no one follows it. Do authorities really expect low paid workers to raise their voice against their employers and demand their rights? And then get deported?

Faisal Ghadiyali

The cycle of peak ends when the person steps the peak as you are blind & cant figure out the next step but cautious measure always give a parachutte while diving from sky. Rents are stagnant due to extra favours to tennats by commitee which needs immediate attention as the approach should be balance by increasing 5 to 8% per annum. Secondly the LTV ratio & bank criterias are always helping buble so indexing needs to be done whereas the NOC from private developer to master developer & to land dept transfer should be a one window operation as it will reflect the appraising or proper wealth evaluations. Also property title verification dept must address the issues related to property owners associations.

Mark Williams

Is that 5% to 8% based on what? market expectations? some landlords are trying for 20% then using dirty tricks to move tenants out even with contracts in place. There are no favor?s to tenants, it?s a minefield to any prospective tenant as the laws even though in place still are wide open ref certain areas of contention. There is still over supply in this market and unscrupulous landlords and agents creating superficial demand for peak rental rates. This time people are not falling for it.

Shahzad

Inshallah this time there wil be no crash. I work in real estate and believe me the government has set a system that will not allow another crash. Now there are thousands of rich people from Egypt, Iran, Pakistan, Russia coming to Dubai every month, and this means they will buy more and more properties and market will keep going up. IMF is always be negative when an Arab or Asian country economy is doing good

Jaber Mohammad

Quoting the article posted by Arabian Business above, second paragraph:
"Over-inflated Dubai real estate prices crashed by more than 50 percent in 2009 and 2010, triggering a corporate debt crisis which unsettled financial markets around the world." .
So, you think Dubai's real-estate crash caused the International Financial Crisis? seriously?

jimmy jones

Just like London, NY, Paris and Hong Kong- Dubai prices are rising because of disparity between supply and demand.
However , as Dubai prices started from a very low base, the % increase may seem higher.

Mark Williams

Sorry so are you saying we have undersupply?? Last time I looked we were at oversupply. Undersupply to a degree could be said for high yield areas such as Palm and Downtownn for eg, but the rest cannot be at undersupply not by a long way.


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