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05 August, 2005

Out of house and home

The faux-ancient Souq Al Madinat throngs with multicoloured crowds tonight, as flocks of glittery saris pass burnt-lobster Liverpudlian tourists, interspersed with robed emiratis swishing through clumps of stocky US marines.

Schoolmarm Margery is glowing brightly herself from an afternoon's baking by the pool. She laments a "lecherous old git" sitting underneath the shade-awning leering at her lily-white form.

"No wonder the local ladies were sunbathing in abayas," she comments.

While Margery browses the overpriced factory-fresh produce in one of the Souq's many "antique" shops, neighbours from a former life pass by and stop for a chat. Having expanded their family, they are desperate to find a larger flat but can't find a two-bedroom below Dh80,000. Even a tiny one-bedroom cell, Dh25,000 two years ago, now rents for Dh45,000.

"Anything below Dh50,000 for a one-bedroom is a steal," they note sadly. "But we need at least two bedrooms."

Despite her new son, the wife is having to work full-time to help afford their current place, cramped as it is. The waiting list for cheap cells in Guantanamo is so long that applicants are just turned away. Even queue-jumping via a several-thousand-dirham "service charge" is no longer an option.

Passing by the massive Marina towers on the way home, only a handful of windows are lit up. Flats there sold out nearly 100 per cent off the plan, yet nearly all remain uninhabited. While unseen, unknown, overseas investment buyers snap up property inflating the market beyond the reach of ordinary people, actual residents cram themselves into tiny cubbyholes, relocate to Sharjah, or repatriate their families and move into bachelor dormitories.

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12 Comments:

Blogger author said...

sad but true...

God bless

05 August, 2005 03:37  
Anonymous nzm said...

I doubt that even the Marinas Towers are fully sold - we see Real Estate agents going up and down in the elevators all the time. There are probably more estate agents in the building than there are residents.

We also 'heard' that the Jumeirah Beach Residences were 87% sold off the plans - yet they still build a multi-million dirham sales office to sell the remaining 13%?

There has to come a time when Dubai stops trying to fool the world with its glitzy marketing which is trying to generate interest from the rich and fabulous to come live here. Sales of property from one sister company to another does not constitute a booming property market.

It's already leading to rampant inflation and possibly a property crash - wait until the people who have bought "palatial houses" on the Jumeirah Palm discover that they can actually see what their neighbours are eating for breakfast. It looks like an upmarket ghetto out there.

This is only hurting the average people who are trying to work and live in the country. Sooner or later, someone is going to have to realise that there aren't that many millionaires in this world that want to live in the UAE.

05 August, 2005 06:17  
Anonymous Anonymous said...

NZM it couldn't be said any better. Thank you!

05 August, 2005 09:02  
Anonymous mohamed elzubeir said...

The property market in Dubai is heading for a catastrophe and the 'poor' people who are struggling to make ends meet after paying half their income to a greedy landlord will be the primary temporary beneficiaries.

nzm, you are right. Reminds me of of those real estate agents. I have just realized that none of them actually do anything. A real estate agent, in my book, would be someone you hand over a description of what you want.. and they would go do the legwork to find something fitting your requirements.

Here, you have to go through all the numbers on the papers, asking if they have something or not. Then, if they happen to have what you can live with, you pay them 5% of that annual contract. Really? If anyone should be paid any money, it's you who's making all those gazillion phone calls trying to find the real estate 'agent' who has that apartment you're looking for. Horrible.

I have considered purchasing a 'lease-hold' property in Dubai for awhile, but after careful consideration, I decided I should spend my money where it will be of value to me. Dubai is a great city, but it can never be a home.

05 August, 2005 17:03  
Blogger BrainSyke said...

Mohammed, it is sad but true:Dubai is a great city, but (till now) it can never be home. I wouldnt be surprised if much of vacant propert is owned by foreign folks. I have read about it before somehere.

05 August, 2005 18:21  
Blogger twisted.ae said...

One major problem with Dubai is that property prices has always been aimed at those who have alot of money in their pocket whether for buying or renting... unfortunately the bulk of the UAE population is made up of Indo/Pak blue collar workers who find it hardest to find decent places to live.
The UAE has to work out this discrepency and balance things out because now even Western expats are beginning to feel a financial pinch and the country is slowly becoming a less desirable place to work and invest in.

05 August, 2005 18:44  
Blogger No Secrets said...

Was bored last night wanted to snoop around and find out whats new.. Took a drive Down Beach Road .. really down found that .. The relentless hours and days that I had spent trying to find a place below 80k were just another edge to the Dubai struggle .. Wanted to to say that the places there @ the Marina .. are probably only going to be occupied once .. the chavs ( learnt a new word from you SD 2day .. Thank U ) have moved out of Bur Dubai and yes they will sooner or later ( I called them Sand Trash ) .. in memory of the sand and the white trash used to deal with on certain ventures out of the MUC ( montreal Urban Community ) ...
ANYWAYZ .. those places are going to be going for a lot less than the expected 10 % of value once the buble burst and I wish it didn't
Alls Well .. Hope you don't mind me NAGGING on YOUr blog SD ..
P.s I've talked too much will just paste this on my BLOG if you don't mind :(

05 August, 2005 19:19  
Blogger No Secrets said...

This comment has been removed by a blog administrator.

05 August, 2005 19:20  
Blogger secretdubai said...

secret - you double-posted so I deleted the duplicate.

05 August, 2005 21:49  
Anonymous Kishore J Sasi said...

What I still don't understand is that why are these properties are still called 'FREE' hold??!!!

06 August, 2005 09:27  
Blogger Irish_guy said...

There was an initial hysteria over this freehold circus but now it seems to be died down. The main reasons are:

a- LACK OF TRANSPARENCY
There is no certainty over the immigration laws, which keep on changing depending on the government mood. As an example, one day, the top immigration official said that expats who have lived more than 20 years in the UAE will get citizenship. The next day, it was promptly denied.

What guarantee does the UAE provide on citizenship or residency? Absolutely nothing.


B- Lack of Political Stability.
The UAE is prone to rumors about political structure in the country, post-Sheikh Zayed. Dubai itself is not immune from these.

Unfortunately, a lot of expats are affected by this stupid marketing trend. Wait and watch for the bubble to burst.

08 August, 2005 12:19  
Anonymous Anonymous said...

Thinking of buying a villa in Dubai?
By Samir Khosla, eDynamic LLC (samir.khosla@edynamic.net)

In 2002 the Emirate of Dubai took the unprecedented step of giving foreigners the opportunity to purchase selected properties. While the property available for purchase was termed as “freehold”, it essentially equated to a 99 year leasehold arrangement. After a sluggish start, in the last 3 years property transactions in Dubai have increased exponentially. The Dubai property market is unique, especially since it is nascent and is not subject to the same market forces as western markets.

Financing your property in Dubai:

1. UAE Institutions are offering mortgages to GCC residents as well as non-residents
2. Most institutions require between 1-3 years local salary history for residents or a 5 year’s history for overseas residents
3. For Dubai residents the minimum down payment is 10% whereas for overseas residents the minimum down payment is 30%
4. Typically mortgages offered are 60 times of monthly salary to a maximum of between AED 3.0 - 5.0 Million
5. The typical debt service ratio expected is between 35- 55% of salary
6. Terms are between 5 and 15 years for non GCC citizens
7. Interest rates are determined based on 4.99%+DIBOR (Dubai Inter-bank) and the lowest currently (August 2005) stands at around 6.49%

As an example, to buy a villa in Arabian Ranches where the average price for a 5 bedroom is US$600,000 - 700,000.00 the 30% down payment will be US$210,000.00 and the monthly payment will be US$ 5140.00 for 15 years

Now consider that based on classifieds in Gulf news, to rent the same villa in Arabian Ranches for 1 year the price would be about $3700.00 – $4000.00 per month.

Based on this limited information, we need to think about what will happen up ahead. Villa prices have increased by 22% (http://www.ameinfo.com/64650.html) vs. those of apartments which declined by 7%, rents have shot up by up to 40% (http://www.ameinfo.com/63768.html) The one caveat to using ameinfo’s information is that they rarely talk negatively about the property market. We need to use market information to assess whether a mortgage payment of $5000 + opportunity loss of $210,000, coupled with the prospect of property appreciation is a reason enough to buy in Dubai VS doing something else with this money like renting in Dubai and investing the difference at another location.

My assessment is that villa prices are commanding a premium due to the following reasons:

1. Limited number of villa projects have come online when compared to apartments
2. Limited number of villa projects have moved into possession phase when compared to apartments
3. Villa lifestyle suits the Arab socio-cultural setting of a more private lifestyle – therefore more Arabs would look at this as to-live investment rather than a to-let investment

I also feel that villa prices may fall by Q4 05 / Q2 06 due to the following reasons:

1. Very few villas have been brought to market when compared to apartments, in my view villas are appreciating since there are fewer to go around
2. At least 5-6 large, villa projects are currently underway that will be hitting the market by end 2006; not to forget the Palm – on which the frond villas would start opening up by late 2006 – 2007.
3. Arabs will not buy villas with the same fervour with which they bought apartments since a lot of apartments were bought with a to-let intention. Buying apartments to let was a feasible situation since the threshold price for a 1 bedroom is US$80,000 whereas that for a 3 BR villa is US$300,000.00 – also the to-let prices as well as purchase prices for villas would be bearable only to a minute percentage of the Million odd expatriates and other people in Dubai.

Based on this information, I think that it’s probably the time to buy an apartment and not a villa. Further, for those people interested in villas, I think that this is a good time to rent a villa.

09 August, 2005 06:56  

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