To buy or not to buy? That is the question

Tempting, isn’t it? On the week of Cityscape Global 2010, there has been no shortage of experts to tell us that the property market has reached rock bottom.  Just 200 exhibitors made it to the show this year, compared to nearly 1,000 two years ago. That, some ‘experts’ will tell you, is actually a great sign. It means things can’t get much worse than the 50-60 percent fall in prices we have already seen.

For two million dirhams, the shop window is impressive: a three bedroom on The Palm Jumeirah, a four bedroom in Jumeriah Beach Residence, and probably a 50-room palace in International City. Okay, you won’t make 20 percent a year, but eight percent isn’t out of the question. That sure beats the five percent fixed deposit accounts of local banks, or the pot luck of National Bonds.

Three months ago, the UAE’s Economy Minister Sultan bin Saeed al-Mansouri forecast that the country’s GDP would grow at 3.2 percent this year, and – if you need more proof – Dubai is the fastest growing office market in the world on a per capita basis, according to a new survey by Jones Lang LaSalle. Even the cynics amongst us reckon the Dubai Financial Market will close the year at over 1,800 points.

So how come nobody is buying anything? Property, as the last two years have taught us, is fundamentally different for one simple reason: nobody really has a clue what the figures are. All the “credible” reports we see are largely put out by real estate agents, developers and property consultants. Pretty much everything they told us last year (which was that 2009 would see the market reaching its bottom) has turned out to be, erm, let’s just say, untrue.

All of which has led to an enormous amount of guess work. Here’s a simple example: if I asked you what the price of a two bedroom apartment on the Palm Shoreline is, the answer will probably vary between 1.3 million dirhams to two million dirhams, depending which estate agent you spoke to, which advert you saw, or whether you actually spoke to the owner who then dropped his price by 30 percent in two minutes.

Or maybe you agree with the theory that some estate agents are deliberately advertising properties at ludicrously low prices, just to lure in customers through the door? As Danial Schon of Schon Properties, the developer behind the Dubai Lagoon project, told us this week: “My feedback from the market is that 90 percent of these listings for AED350 or AED400 per square foot are bogus.”

All we do know is that we don’t know anything. Nobody wants to make life-changing investment decisions based on guesswork. Another ‘guess’ is the scale of what is being termed shadow inventory. These are property owners who purchased apartments in prime locations at launch price, and even today are still sitting on a 30 percent profit if they sell. They have watched the market tumble in the past two years, in the hope it will start to recover. Come the end of this year, how many will decide to cut and run with a still decent profit – plunging prices even further down?

In times of crisis, the best advice is usually to do nothing. As Cityscape Global this week proved, it’s advice the market has taken.

Anil Bhoyrul is the editorial director of Arabian Business.