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Dubai property prices - why the only way is up
by This email address is being protected from spam bots, you need Javascript enabled to view it on Sunday, 3 August 2008Posted on Monday, 11 August 2008
Views from Two Worlds?
Posted by Louie Tedesco at 08:47 UAE time
Reading the comments about Dubai's real estate development and comparative statements clearly shows two opinions- from those who have actually lived in a developed city such as Monaco, Frankfurt, London, et al, or even any small town in a developed country. And then the opinions of those who haven't. For the latter group, the "magic" of Dubai is that tap water flows and electricity generally is available 24/7? Although there are exceptions in neighbouring areas only a stone's throw away from Dubai. Water quality, air purity, food safety and surviving the traffic mayhem are equally important but are always overlooked in any property discussion held here.
I find it audacious that comparisons are constantly made between Dubai and well-developed cities with centuries of tradition, expert craftsmanship and infrastructure that can support both tourists and residents. Here, we can't even rely on taxi services much less the public transport bus system. A major residential development - with raw sewage running in the streets -repeatedly- for weeks on end? A new shopping mall - where the ceiling collapses? The "rainy" season every Dec-Jan where one inch of rain floods streets for weeks and every roof leaks- surprising the authorities every year anew as though for the first time? Is this happening in Monaco, Frankfurt and London? I think not.
I'm from a country where we have not had to fetch water and provide our own back-up generator since around 1920, so the magic of opening a water tap or flicking a light switch is lost on me. Keep buying and investing, the property price can only go UP and the "magic" of Dubai will reward you. Or, maybe not?
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Posted on Sunday, 10 August 2008
Property prices
Posted by Hassan at 00:37 UAE time
I am in total agreement with Mr Westley's comments:
Prices will continue to rise.
Where can you get residency visas to stay when you buy property.
Dubai has started booming in the last 4 or 5 years. We saw the falls in property prices in London in the early 1990s and prices started picking up in the mid 1990's and have continued to do so until now - that is approximately 17 years.
Bricks and mortars are a safe bet.
Dubai is a wonderful city and safe haven.
Prices will go up and up at least for the next couple of years!
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Posted on Wednesday, 6 August 2008
Heard it all before
Posted by G Lowbridge at 13:47 UAE time
According to these guys the peak was over a year ago and prices were supposed to fall 20 to 30% by 2008. The fact they have increased almost 80% in 2008 suggests they got it slightly wrong.
A lot of the negativity seems to be from people who are desperate to see a fall as they didn't get involved when they should have. I wish i had but i'm not going to start mocking other investors and scaremongering out of bitterness.
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what goes up must come down accroding to Darwin
Posted by paresh at 12:21 UAE time
The wealthy will come and go but what sets up the maturity of a market are not investors per say but the middle classes who live and work in a country and use thier resources to be able to buy a home of their own. The rest is like SWFs which can come when the going is good and disappear when it gets rough.
A wise man will never bet on prices going upwards for ever.
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Posted on Tuesday, 5 August 2008
Not according to Morgan Stanley
Posted by John W at 13:23 UAE time
Seems that someone with perhaps a few more facts about the market does not agree with you. Please see:
http://www.arabianbusiness.com/526746-dubai-property-prices-to-fall-10-by-2010?ln=en
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Posted on Monday, 4 August 2008
Pessimistic or realistic?
Posted by SR at 16:06 UAE time
Dear Mr. Fadi, I think most people here are actually being REALISTIC rather than being pessimistic!
If you are willing to put your money on it because of hollywood actors, turning buildings and statistics such as highest concentration of expensive cars (first time I heard it though!), then go ahead! If all goes well, lucky you!
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Dubai cannot be compared to open and socially responsible countries like UK and Monaco
Posted by Nathan Andrews at 15:59 UAE time
In years and generations to come, the world will look at Dubai and say this was the home of modern slavery and exploitation of the poor and vulnerable. Wealth? At what cost, wealth is hollow without social responsibility. The only reason for these alleged increases is because its a smoke and mirrors economy with eventually everything owned by the state. Wealth? for Gods shake these people don't even allow you to use Skype as it effects their revenues..this tells the real story how the value and underlying amount of wealth.
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Dubai is different
Posted by Fadi at 15:27 UAE time
There are a lot pessimistic people in here, if Dubai had listened to you, it would never have become a global city. Fact is Dubai has become a magnet for well-off people from across the globe, sports and movie stars come to Dubai whenever they get time, and they all haev good things to say about it.
Hollywood stars are designing buildings here, and Dubai has plans for revolving towers and underwater hotels. Thats why you cant compare Dubai to stagnant places like Hong Kong and Singapore.
Add to that the fact that most people in Dubai are very well off (highest concentration of expensive cars in the world) means that prices in Dubai will never decrease. And thats a good thing because it means that well-off, well-heeled people will keep buying and coming to Dubai in droves.
Prices are going up and people are still buying, that should be sufficient proof that Dubai is different and that it will continue in its quest to be biggest and best in everything.
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Like an earthquake
Posted by Ed James at 15:22 UAE time
I understand Mr westley's point. What he is saying is that basically There Is No Alternative. If you want to be in this region, Dubai is the only place to be (within reason).
That is why this is so painful and why there is so much anger here. People are frustrated and fed up with the conditions and rising cost of living, but to some degree are trapped.
It's like pressure building in a volcano. Something will eventually give, but no one knows the damage.
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Heard it all before
Posted by Paul at 14:39 UAE time
Blah blah blah. It's the same old tosh I remember reading in the UK just a year or two back. We were told every wealthy russian and his dog was beating a path to London, the financial centre was booming, low interest rates look set to last forever, etc. so massive price rises were sustainable. The UK is small, limited supply, not enough building, blah blah blah. And a few months later - pop. It is now in freefall.
As a business owner in Dubai and the UK, I can assure you that Dubai is no longer seen as a stable and attractive business destination. The mismanagement of the economy has resulted in 20% inflation, which is killing long term competitiveness. I am already in the process of moving my business to a tax-free destination in the Caribbean which provides not only massive cost benefits, but has proper uncensored internet connections, British legal system and are not nestled between volatile countries engaged in a bit of nuclear brinkmanship. Great beach and diving too! Waterfront properties for 150k USD! No brainer.
Dubai has shot its bolt. Bubbles are collapsing around the world, and Dubai's dependence on construction as plan A, plan B and plan C will come back to haunt it as it has nothing left to fall back on.
And please... you are not *seriously* comparing Dubai to Monaco I hope. A bit of marble and gold taps bolted onto a concrete monstrosity built by third world labour earning less than 10 bucks a day is not going to compete with some of the finest historical buildings in Europe. All the pools in the Greens are broken and Emaar says it might take a month to fix (it has been 3 already). You think that happens in Monaco?
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$11,000 per sqm
Posted by Realist at 14:31 UAE time
People paying $11,000 per sqm for properties with shoddy workmanship.
Look at the comments by a reader in the building trade moaning about parts of the shopping center falling down.
He is not surprised, as he is part of it. And has knowledge of how buildings are being constructed here.
And yet you are suggestingg that the price will continue to increase.
I think that it will be interesting to how the market reacts as more and more porple realise that what they have bought does not match the glossy, off-plan brochures that they bought from.
And teh market realises that it is not worth $11,000 per spm.
Will prices still go up?
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Back to Basics
Posted by Trojan at 12:52 UAE time
Let's get one thing straight: Dubai is no Monaco, Moscow, London, Paris, or New York. There is absolutely no valid ground for comparison. As they teach you in a Finance 101 class in business school, a valuation by comparibles is as the name implies - they have to be COMPARIBLE. Cities like Hong Kong, NYC, London, and others are the financial and service hubs for a huge and strong manufacturing and industrial base. Add to that that Dubai is becoming extremely expensive, with productivity and economic losses from traffic congenstion, it is thus becoming less and less attractive for companies to locate their regional operations here.
One thing has to be kept in mind. The operations that these international companies base in Dubai are not high-payroll numbers generators. In other words, they are not the manufacturing operations that will employ people in the thousands with the high wages that go with them. They are mainly logistical centers, regional sales and customer support operations that typically employ a small number of people . And don't forget that tourism, setting aside Dubai's biggest obstacle to become a tourism hub: weather, is not a high payroll industry either. Most employees in the tourism industry are low and middle wage workers; in other words not the sort of people who can afford those outrageous home prices. A general rule of thumb that was widely talked about in Los Angeles in the 90's in the aftermath of the slow down in the aerospace and defense sector, is that a manufacturing job supports about 10 service sector jobs. The moral of the story is that a manufacturing and industrial base is the pre-requisite to a strong economy and the service sector that goes with it. Financial ceners like London, NYC, Frankfurt and Hong Kong do not stand up on their own, they are the gateways to industrial regions.
As others stated in the commentary, you have to look at the demand and supply. A casual observer will notice that the vast majority of apartments in major developments such as JBR, Dubai Marina, Palm Island...etc. are unoccupied. The lights are always out, nobody is home.
This sort of thing happened before, I saw it in Las Vegas and other speculative hot spots in the US a few years ago. Don't ever think that "it is different this time". That is what they said about the .com bubble, the real estate bubble in the US, and every other bubble in history; and that has always lead to trouble.
Many people are making arguments based on mushy logic and hyperbole to rationalize what is going on in the Dubai real estate market instead of looking at the hard, cold economic facts and forces at play: low interest rates, excess liquidity, petrodollars that people don't know what to do with, lack of transparency, and a dearth of other investment opportunities - all the ingredients of a spectacular bubble that will pop sooner or later. The fact of the matter is that timing the market can be a dangerous game. Therefore, no prudent investor could predict if prices are yet to rise or if the tipping point is just around the corner. You jus have to stick with the fundamentals.
No one said that being rational and standing your grounds in the face of madness of the crowds is easy, but that is what made people like George Soros and Warren Buffet such legendary investors.
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Point taken!
Posted by SR at 12:08 UAE time
I think Mr. Westley makes a good point! As long as the region (I mean the MENA) is in turmoil, Dubai property will boom. We dont seem to have an end to the problems in Lebonon & Palastine, somebody dies everyday in Iraq, Iran is in a quagmire, KSA is not so good for families etc. The list can go on, I forgot Sudan.
These people will more than be happy to make Dubai their home at least for the short / medium term, so there will be demand for housing.
On the other hand, the fact that South Asia is still out of its economic / political / terrorist problems means a further migrating propensity from that region as well.
Moreover, once you are in Dubai it is hard to get out, haven't any of you guys felt it? Everytime you think that you will leave in 02 years, or leave once kids finish education etc. etc. but in reality very few really do that! Do you know the reason, despite inflation, extreme summer temperature, dust, traffic woes etc. people still make reasonably good savings! Given the basic human nature of unlimited needs, money holds people to this place. So even though the quality of meat & wine is not so good people will still stay back as long as their bank balances / investments swallow (albeit by ever shrinking percentages!).
This also leads us to the point when this will boil over! No sooner the region is stable and / or it really becomes difficult for people to save a reasonable amount, say at least 10% of the household income! Although the former may still be far away, the latter is looming!
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Posted on Sunday, 3 August 2008
A bit of objectivity
Posted by Trevor Skinner at 22:39 UAE time
The rationale behind this is that because Dubai is tax free, like Monaco, then that is the benchmark. I'm sure that certain specific developments will have the cache that will attract the Cote d'Azur crowd, just like many other places in the world.
What I have trouble committing to is the idea that a poorly built studio flat in a block of 100 in the middle of the desert with no services has anything whatsoever to do with what is happening in Monaco.
Regards,
Trevor
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Cost of Living (property) is simply too high
Posted by Aadil at 22:22 UAE time
I have no doubt that Dubai will achieve all its targets in relation to attracting tourists. The theme parks and over-sized malls are exactly what's needed.
However, in my view, everyone is overestimating Dubai's attractiveness for professional expat workers. Unless we see a substantial correction in the prices of property, many of those considering a move to Dubai will think twice - and eventually opt against it.
Prices may well increase in the short term, but that will only make the inevitable fall more painful.
We cannot ignore fundamentals any longer. Everyone should read the article on this site:
"What will it cost us? by Mishal Kanoo on Tuesday, 29 July 2008".
Dubai is supposed to be a family orientated city (that's what the brochure says). But the reality is Dubai is certainly no longer family friendly for the entire spectrum of employees (low-end workers from Asia or highly educated professionals from Europe).
'The powers that be' should put the hype that is Dubai aside and take a look at some of the negative coverage Dubai has been receiving in the international press, i.e No Physical Affection in public, Unmarried Couples canot live together, Endless Traffic, Desert Heat exacerbated by construction and pollution, Dubai hates gays, etc. etc. etc.
A message to everyone interested in the future of Dubai. Stop chasing a quick buck and consider the long term impact of your decisions. And throw out speculators from the property market.
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