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Dubai property demand flat amid global slowdown
Dubai residential property demand was flat in October according to broker Asteco as a global economic slowdown saw further weakening of international real estate markets.
“On the secondary market, the last week has been flat and not a lot has happened. We are getting sales but about half to three quarters of what it was two months ago,” said Andrew Chambers, managing director of Asteco.
Other agents have reported a decline in prices in some locations.
Timur Usmanov, a real estate agent for Dubai-based Monshaat Properties, said he has seen declines of up to five percent across Dubai in the last month.
"Investors are confused and they think prices will drop," Usmanov said.
The global financial crisis has hit demand from foreign investors, which make up a large percentage of property buyers in Dubai, while tightening liquidity has made home financing more difficult, agents said.
Local mortgage providers have slashed home financing from 90 percent to as little as 60 percent in recent weeks.
Recruitment consultant Ellie Rankin, who has been trying to sell her one-bedroom apartment in Dubai Marina, said she has not seen the interest she had hoped.
"[My apartment] has now been on the market for a couple of weeks... I expected more interest more quickly,” she said.
Media professional Phil Smith, who also owns a one-bedroom apartment in Dubai Marina, said his property has been on the market for over a month and that he has received only one offer that was below his asking price.
Dubai was the first UAE emirate to open up its property market to foreign investment in 2002, triggering a six-year boom. Real estate broker Colliers International said earlier this month Dubai house prices rocketed 76 percent in the year to June.
Colliers’ House Price Index for Dubai showed house price growth slowed from 42 percent in first quarter to 16 percent in the second quarter.
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Posted by brandaid, Dubai on 6 November 2008 at 14:09 UAE time
Hi Troy, my view is if you have paid most of it and it's already built then go ahead and rent it out. I know that many developers and brokerage agencies with whom I deal with have fired many staff this last week (2 of the biggest agencies have), which is not a good sign. If you had only put in 20% or so I would say that it doesn't make sense to put good money after bad. If the market drops 40% or more, then continuing to make payments doesn't make sense, as you would actually lose more by continuing to pay than you would if you backed out. Think about this though: for all the folks that just bought into new projects at very high prices and have just put in less than 30%, but expect the market to drop more than that, say 40-50% or more, why should they continue to make payments knowing that it will be a very long time before they will actually get that money back? With the Escrow laws in place, if many people stop paying, and the developers can't build the project due to lack of funds and go under, then the money in escow should technically go back to the investor, less reasonable expenses. But how this works when the developer has bought the land from the Master Developer who probably has first rights on any money owing, is anybody's guess. I guess you would get back some of your money, after the MD has taken their cut (if they are still owed money for land). Obviously this doesn't work if you bought the property from a MD directly, as the Gov't will make sure the company doesn't go under, but it makes you think about the fate of many non-Gov't backed developers.
Posted by troy, Dubai, UAE on 4 November 2008 at 01:31 UAE time
Realto, I totally agree that these are unrealistic prices by all standards, but perhaps you need to keep in mind the wealthy locals who see more value in buying a prestigious 60 million estate in their hometown than buying in Mayfair? They spend millions to get a special car number plate and thousands for special mobile number. You never know, they might own a fancy UK home as well. Don’t underestimate the wealth in this country!!
There is a lot of sense in what many of you are saying, especially Trojan, simon and brandaid. What would you guys advice someone who has already bought property? I bought a second property recently and i see prices dropping everyday and at an alarming rate. I was taking it as a long term investment, but I’m getting really worried from what is happening now
Everyone was expecting a correction, but prices are dropping very fast, we're talking at least 40% on off plan, if not more, and 20% on ready property. That’s worst than the stock market!!! I'm really lost here, owners are now competing on who will offer the lowest price in the market. My property is ready next month and it's a golf course unit by Emaar...I was selling it below market price last month and today owners are accpeting any price you offer. I might already be in negative equity. I thought it will hold it's value because of the location, quality, developer etc... But it seems there is extreme panic in the market...what do you guys advice? Shall i follow the herd and sell amid this market panic or wait for a couple more months till the picture is a bit more clear, it’s a ready property so I hope it won’t decline any further OR should rent it out for a year (which should cover my mortgage) and see what will happen next year
Posted by Realto, Dubai on 3 November 2008 at 09:43 UAE time
A simple question, would you spend 65million on a 5 bed villa in the so called luxury development Barari or for the same amount a beautiful Victorian house in Mayfair London, probably one of the most luxury areas????????
this is why the dubai property market does not make sense!
Posted by Bloke on 2 November 2008 at 18:19 UAE time
It is interesting that people are very polarised on this subject, to the point where they are getting very frustrated when people have differing views. It seems that to be the person to shout "We are all doomed" the loudest wins...oh with a bit of I told you so to go with it...well, I guess we all knew there would be a correction though not many can claim to have foresaw the global meltdown we have seen though if they did they are probably wealthy now.
My view lies somewhere in the middle because of a few facts,
no-one who owns a villa or an apartment will lose any money on it unless they sell it for less than they bought it, if you live or rent your property then fine.
The renting situation in this city has not changed over night, the fundamentals were very good a few weeks ago, 7-10% per annum return though this may have dropped a bit it is still much better than the uk where it was 3-4% for years, also as noted in the uk when property prices fall no-one wants to buy as they don't know where the bottom of the market is so they rent instead.
To take a reading of the markets right now is not going to be a very good weather vane of tomorrow as we will only see where we are in a few months time, yes the market may fall, maybe considerably but Dubai will not fall in the sea, the largest market of them all, the US, is rudderless until the new president os sworn in and once the dust settles from that we will see.
If you made financial decisions based on what everyone has said and firesale everything if you can this week then you may find yourself having to pay expensive rent next week...
Posted by SR on 1 November 2008 at 11:33 UAE time
I heard this phrase somewhere and it is very appropriate in this context: Capital gains are nothing until somebody writes a cheque in your favor. As for SID's comment, I guess if you say all those who post bitter comments have not invested here so their opinion is biased, may be logical but not realistic. BUT if you follow the same logic, all those who are optimistic about the property market here are the ones who have invested / developers / brokers so then it follows that their opinion is also biased. I agree with one point though, a correction if any will do a load of good to the market in weeding off the speculators.
Posted by Simon on 31 October 2008 at 17:08 UAE time
Good luck to you...especially when you have to liquidate what you have because prices fall further. Yoiu have missed the point completely.
Currently you are making a 'paper' loss on profits alone. That loss won't effect you until you liquidate what you have. So there are ups and there are downs...on paper.
What we are talking about is a deeper correction than that what you wish to admit or realise. You will only feel the effect when you want to sell and actually realise that you won't get the returns you thought you had 'banked'.
Look at the UK and you will see what I mean. People there won't even admit that prices have fallen...Why?...becuase they haven't tested the market and tried to sell what they have. When they do they get a real shock.
The same is going to happen to you...if you can find a buyer. What you percieve a property is worth in your portfolio is not what the market is yielding. You won't believe the truth until you decide to sell...then...WELCOME TO REALITY!!
The back biting from expats is way beyound what you have in your own mind. The reality is...you are living in a false reality. YOur properties are not going to be worth what you have valued them at in your own mind. The market has changed and 50% drops is going to be very conservative moving forward...unless buyers appear on the horison ready to buy the glut of properties hitting the market.
Posted by brandaid, Dubai on 31 October 2008 at 15:15 UAE time
Sid, I have also invested here, In Canada and the Philippines and I have been in very senior positions with several major developers and estate companies, so please don't assume that we all have no vested interest in this. I know only too well the way the market functions here, I've been here 10 years. Let's look at the fundamentals, there is no real industry here except construction and all but 15% of the population are here as "expatriates", so this is not like any of the markets you are in elsewhere. The money comes from speculators who flip, end users who need mortgages and investors like yourself who look at rental income. With the price of property here now so expensive, the quality poor and the fees going up and up, speculators have many other better and more profitable places to invest now. There are no where enough end-users to afford to buy all these luxury places and with most of the economy here based on construction, knowledge, tourism and service, most of the expats here are not in a category where they can afford to buy a place, unless they are very wealthy or have very high income packages, which excludes most of the service, knowledge and tourism workers. With the price of property as it is now and the municipality stopping sharing etc, employers will now have to provide expensive accomodation or allowances to staff, so that they will have to raise their prices to make a profit. Once the price goes up it will no longer attract tourists or shoppers as Dubai will no longer be competative. It's simple economics. If you have trippled your money then you look like a speculator to me, so if you are now prepared to sit on your property, if it gets completed that is, and rent it out to those who can afford it, if you can find any, then I wish you luck. Otherwise, I predict that some of your off plan properties will remain off plan, you will not be able to sell any of your existing properties for a profit any time soon and your chances of earning rent returns that are anywhere near the ROI that you would expect based on the price you paid for the property are nil. But I wish you luck in your optimism.
Posted by Raj Dubai, Dubai, United Arab Emirates on 31 October 2008 at 15:08 UAE time
Dear All
I was watching Habitat on TV last nite and the head of RERA stated that the Market is great in Dubai!!! Reading your comments is giving me a different opinion and its not only you but loads of others whom i interact are absolutely lost on Dubai property.
Yes i own property. Why would RERA comment otherwise?
Posted by sid, Sharjah on 31 October 2008 at 14:13 UAE time
I think it's safe to assume that all the people saying the market is or has crashed are the ones who do not own properties in any of the emirates. So you have to admit, your opinion is biased.
I have invested in Ajman and Iran heavily, but also in Malaysia and Philipines. I'm perfectly happy with any adjustments that might happen in the market here. I have seen my money triple in a matter of a couple of years. So what if it goes down 50%. I've still done ok. Plus, I have not invested on speculation. I buy to rent, so there is always income. Sometimes more, like now, and sometimes less, as it might very well be in the future. But still I feel I have done OK.
I think what a lot of people are forgetting is that a decade or longer ago when there was no tourism or a construction, there was a lot of business here still. That's why a lot of us moved here years ago. Those things will still be here.
I think this 'bust' might be just the right thing to take the speculators off the market and make things a bit more 'real'
Posted by Simon on 30 October 2008 at 22:11 UAE time
I have worked and lived in Dubai for the last 5yrs. I have been in real estate (Working) from the very begining. I've personally bought and sold and made great money whilst the 'jealous expats' sat on the side lines just complaining...I've been there, done and got the Tshirt so to speak.
But, from the inside, I have to say, this market is going down and it will overtake the USA and UK very, very quickly. Dubai doesn't have the ability to stand on its own two feet within its own populous to use/buy the property glut that there is.
We/Dubai rely on outside buyers to keep the market afloat. $US has gained strength by 25% in the last 12wks or so. That makes property here 25% more expensive to a foreignor without the Dirham price tag changing. Then factor in the banks reducing their loan to values down to 60-65% and it gets even harder for jolly foreignor to purchase property here.
Then you have to factor in that jolly foreignor is being hit hard in their own economies. Wealthy people have lost millions from deleveraging their debt positions. Second homes are in less demand.
Then factor in the Dubai's new laws with regards to villa share, visa renewal, RERA and land department rules and you have the makings of a disaster.
Don't get me wrong, I love Dubai but I see what I see and it is for real. I, like many others, have been spending tomorrows income today not thinking this could ever end...but it is...and it makes you think twice about spending. If we stop spending because we fear for our incomes...what effect will that have on the economy here.
I understand Mikes strategy for buying and living/renting the property he has...and he is right on that score. BUT...that is not what 90% of buyers here are in the market for. They are flipping properties to make money for immediate capital growth (greed in many cases). Once that game is over, and in reality it is, you will see the money and the owners of that money leaving Dubai.
I know I have gone on a little but there are so many other factors that make the Dubai property market a bigger risk than people realise. The Risk/Reward balance is now way out of kilter and heavily swinging to the risk side of the equation.