Negative equity hits 70% of expat home owners

Study shows 22% UAE expat owners bought off plan, with further instalments to pay.

Seven out of 10 expatriates who own a property in the UAE have revealed if they sold it now they would lose money, according to the findings of a new study.

The research by market research firm Real Opinions found that four out of 10 UAE expatriates had bought property in the country, of which 22 percent had bought off-plan and still had further installments to pay.

Of these a quarter said it was unlikely that they would be able to make the next payment – highlighting the importance of job security in the region at present, according to CEO of the research firm, Dan Healy.

However, the findings follow a previous study by the same company that revealed one in four thought it was likely that they would lose their job in the coming 12 months, or had lost their job recently. “Seven in 10 now believe they are in negative equity and this presents unprecedented and unexpected implications for these expatriate owners – it is especially a time for concern given the current finance options in the marketplace and laws relating to bad debts’,” Healy said.

“For those property investors finding themselves in negative equity, job security will be imperative in order to ride out this dip in the market,” he added.

The researchers also asked how long people thought the economic crisis would last – the question was asked in the week running up to the G20 meeting.

Findings show that most UAE expatriates believe it will take 18 months for the country to recover – with most citing November 2010 as the end date.

However, responders did understand that this was a global crisis and the grass might not actually been greener anywhere else, Healy revealed.

“There is still strong loyalty and the belief that the UAE will top the list of countries worldwide that will emerge quickly and economically stronger, matched by Saudi Arabia and followed closely by Qatar,” he said.

The property part of the survey of 465 expatriates working in the UAE was conducted online between March 25 and March 31.

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Posted by: Paul King

Too many people are confusing common sense and reality with negativity. This "bear market" in the Real Estate segment of Dubai has not fully expressed itself yet and the primary trend is down! This is fact! Negative sentiment has little to do with it when an obvious bubble explodes and market forces start to dictate values. If there is confidence that markets will recover sooner rather than later, then good for you, you may well be right. But my prediction is that this is going to be worse than people expect and remember the free market rarely takes you where you wanted to go, but takes you where you ought to be.

Posted by: Johnny Lately

Its good to have independant thought, but lets not forget where we were last Summer. Back then, Merill Lynch & EFG Hermes (i think?) published unpopular articles saying Dubai property would drop 10% in 2009. Here we are in 2Q 2009 and currently 30-50% down. I don't think 80% is too pessimistic, it happened in Singapore and Hong Kong. Saying the property market will drop 80% now, is as unpalattable as saying it would drop 30% back last summer. However, market forces will prevail over 'chat room' opinion, so lets hope i'm proved wrong.

Posted by: Kaptain

It's interesting to read when people say that majority of them are pessimistic. Reason for such an attitude? While there were heydays in this region for properties, everything looked bright and sunny. But did anyone care to step out in the heat of June/July just to realise how painstaking it is for the labourers who worked day in day out to make these properties spring up in the Good Ol' days. And then adding salt to the wounds, those labourers were not even paid, if paid through intervention, that wasn't suffice enough to run homes back home. Wasn't that injustice? Don't people realise the saying, "What goes around, comes around"? Now when the rich are getting to pay for what they have accumulated and feeling the pinch, so why the cry? Feel the heat that was felt by those numbed for years. For an example, I visited an office in those brighter and greener days and enquired the cleaners were earning, bluntly they said AED 600. Now after the financial downturn, the cleaners were although replaced, they were putting up AED 2000 which is quite healthy for them. Fact is, when merrier people tend to forget those down below. NOW FEEL THE HEAT!!!! Enough of bone breaking attitudes with desolates.

Posted by: independent thought

Good to note the following - Unknown and his mortgage headed comments, yes to all. Wakey, Wakey, I think you are perhaps a little too pessimistic but yes come the summer expect a further downturn. To the property Guru, obviously has no idea when it comes to what a valuation comprises - what it costs to build? inflation? Both of them have only a tenuous relationship to market value, a definition accepted on a global basis. So sorry value is based what the market will pay ("market value") not some odd formulaic comprising the interrelationship of inflation, construction cost and other "fundamentals". Having said that I agree whole heartedly with his don't cry comments. Come on people if you honestly believed that prices should increase 30% every 3 months is a good thing you are very naive.

Posted by: Paul

It is refreshing to read balanced mail like the one from Maqsood. I read all other mail and it is amazing how people like to look only at the negative side and feel good creating a negative image for Dubai? What is the purpose? Is this an internal revenge towards what is happening? I have two properties in Dubai and I am in the same boat as everyone else and yes, my job is not as secur as it used to be. I am still positive about it although the worrying thought is always there but after 22 years in Dubai, i am confident that Dubai will be one of the first to come out of this and yes, it won't be the same as 6 months back but for those guys who can afford to hold on, i am sure the reward will be there. Let's be balanced in our thoughts and look at both sides rather than just the negative side. Talking about ''Property Crash 11'' is yet another speculation which can only harm the minds of the readers!!

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