The waiting game

With Dubai’s property market seemingly on the cusp of a new boom, Arabian Business speaks to the investors who fell victim to the emirate’s last real estate bubble

It is a Saturday morning and in the shade of the Burj Khalifa there is screaming and shouting. Police have been called in to keep a lid on an angry mob as tempers fray and people shove each other out of the way in a bid to get to the front.

There are probably few cities in the world where a property launch can incite minor social disorder, but this is exactly what happened when Dubai’s Emaar started sales at one development in April.

According to data from lender Deutsche Bank, average property prices in the emirate rose for the sixteenth consecutive month in March. This has led to concerns that Dubai could be entering into a new real estate bubble, similar to the one whose bursting in 2008 led to a collapse in prices of up to 60 percent.

“We are concerned about the level of growth which we’re seeing, because it seems quite evident that there is speculation back in the market,” says Matthew Green, head of UAE research at real estate services firm CBRE Middle East. “We can see it with the recent Emaar launches, where they’ve sold out and lots of hype has been created.” This hype has been supercharged by the announcement of several new megaprojects, including Mohammed Bin Rashid City, which — when complete — will boast more than 100 new hotels and the world’s biggest shopping mall.

Worries about another bubble have been confounded by the activities of some investors, who have been seen advertising properties online at a mark-up of as much as 30 percent, only hours after making the original purchase. “We should be seeing [price] growth, but the flipping mentality appears to be coming back,” Green adds.

For some investors, all of these developments are eerily familiar, with many still reeling from the consequences of the last crash, which halted work on many of Dubai’s real estate projects.

One of them, Taimur Rana, did not consider himself a serious investor when in 2005 he purchased four properties at the Dubai Lagoon development.

The four one-bedroom apartments he bought at the residential community, which was to feature restaurants, a shopping mall and a man-made lake, were intended for his children.

The properties he bought were scheduled for delivery in 2007, but he is still waiting more than six years later, with Dubai Lagoon a half-finished building site. In the time since, he and his family have been forced to live in a rented property elsewhere in the emirate.

“I’m paying rent — AED115,000 for a two-bedroom apartment in The Springs. Over the cost of six or seven years I’ve paid nearly AED1m. It’s a complete headache for us,” he says.

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Posted by: peter peter

The situation can be eased a lot if the Dubai government takes hard decisions even if it goes against their interests in the short run. In the log term it can only benefit Dubai. For example:

Give people who invested in property "proper" residence visas as originally promised.

Reverse decisions like removing "Free Zone" status of buildings in TECOM C.

Get on with declaring dead projects DEAD ! RERA dragging its feet does not help at all. Auction off such projects to builders who have proven means to finish them and at least try and return some of the money to the original investors in case they want their money back.

Deyaar - a semi govt. agency - on the one hand declares record profits but refuses to return money to investors on projects that haven't got off the ground several years after their contracted deadline to deliver. Correct that.

Set up special fast track courts to settle outstanding property disputes.

Punish companies who squandered investors Escrow money.

Posted by: Mujeeb Haroon

In order to secure the money, international migration is continuesly growing due to disturbance, economical crises, political and reglious problems. As such those who have the finance may shift to thier desired country for residence by fulfilling the Investment demand either Property purchase or business establishment . Similarly on the other side the country who offering Resident or permenant visa type also enjoy the huge Investment alongwith the fine brass professionals and businessman. We may say that the investment and quality of Investor or professional is also quite helpful in the economy and growth of the country where such new immigrant arrives.

It is very painful to leave your motherland, relatives, and many memories of our golden moments .As such migration towards other country is not a joyful experience. Being a victim of resident visa policy I purchased a property on the promise for permenant resident visa, but discontinued within 3 years. Where should I stand now.

Posted by: shaheen

Remember 2008/9 when expatriates suddenly lost their jobs in masses. Small businesses collapsed and expatrites had 21 days after visa cancellation to sort out their affairs and leave. Prior to this economic crash workers would leave Sharjah at 3am to make a 12 to 15 km journey to arrive at work at 8am. That was pre crash. Property developers absconded with investors money and there were abandoned cars all over the Emirates belonging to sacked workers who couldn't pay their debts. And then the Emirates became a kind of ghost town as property prices tumbled and empty properties resulted in a massive fall in rents. Oh it's such an uncertain area of the world. I had never seen anything like it.

Posted by: William

I saw similar 'tumbling' of prices in London. If you say that you did not see anything like it then there is high possibility that you have not seen much of the world and are a novice investor. Any investment where you can multiply your returns has equally high risk. Keep that in mind for future investments.

Posted by: Peter Fleming

It's unfortunate but the cupboards of the Dubai's previous real estate boom are littered with cases where small investors have lost their life savings to crooked developers.

Many of those developers are absconding, but a few like DANA Gardens in IMPZ next to Sports City are very much around. Yet RERA does little to help small investors get refunds from large, politically connected developers like Ali Moosa and Sons. WHY?

Posted by: The Observer

Since crisis period majority of Dubai property issues i.e delays, non-completions, cancellations, defaults including high maint fee woes reported and discussed in AB columns relate to high rise or apartment building projects and not so much in the villa segment investment. 3rd or 4th round investors in villas suffered reduced values due to greed but did get the villa or town house, even Nakheel with all its image recently handed over the villas. So what does this tell you about the local real estate environment?
Investment in House for family use-OK
For rental purpose today-not sure(Plentiful supply)
Investments in high rises-Think and calculate a lot.
Ideal villa purchase pricing:
For Eco to med qlty dwellings:AED450-530PSF
Semi luxury/Detached dwellings:550-650PSF
Premiums over these prices to be considered in terms of location, facilities, developer reputation and basically how desperate you are. Be assured Dubai remains an excellent place till affordability do us part.

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