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30 January, 2006

High rise, high risk

UAE stock markets are spiralling southwards this week, partly due to property giant Emaar's disappointing performance.

The property market itself has been softening, at least according to analyst Matein Khalid:

"As plunging premiums in and the post summer Ice Age in secondary sales on Dubai residential towers suggest, there are elements of an old fashioned glut in the apartment market and buyer disillusionment on delivered properties, even in bellwether projects. This is not an opinion but a simple fact of life, a reality passionately denied by real estate brokers."

Last year Khalid offered this interesting calculation on a likely apartment glut:

"But in 2007-2008, a phenomenal 200,000 new units will hit the market. This means that we need about 800,000 new expats who are not labourers, housemaids, tailors, minimum wage bachelors or the Sharjah/Ajman commuters to fill this unit. In essence, a doubling of the professional high income salaried population of Dubai in the next two years. Realistic? Not at all."

Labels:

47 Comments:

Blogger Balushi said...

Good News!

They have 800 houses why the hell they don't give me just one???

30 January, 2006 19:18  
Blogger secretdubai said...

I can't edit posts unfortunately (Blogger doesn't allow it) however if you want to repost, I can dl the earlier ones.

Thanks for the html stuff btw.

30 January, 2006 19:30  
Anonymous Anonymous said...

Errr... has this site been blocked? There's nobody here!

You anon, I was going to say you should have used remarks, but that doesn't work.
Even so, this is a little clearer.
< a href="http://www.example.com">Clickeable text here< /a>

Again, the space between the < and a needs to be deleted for it to work.

30 January, 2006 19:38  
Blogger Tim Newman said...

A property crash in Dubai will be about as surprising as Christmas.

30 January, 2006 19:39  
Anonymous Anonymous said...

Thanks anon2. Balushi must be in Oman, I'm in India. That could mean the site has been blocked. Oh dear!

30 January, 2006 19:39  
Blogger sheikha cheryl said...

Ha..Ha..Ha! Gotcha! Khalid=forked tongue. This is the UAE version of "Irrational Exuberance". You would think they "paid" attention to the US in 2000, but Noooo!....

30 January, 2006 19:40  
Blogger secretdubai said...

Thanks Anon(s) - I dl the earlier ones! I have this odd feeling that Anon comments with html may not work properly, but it may just be LiveJournal that does that.

Tim - Christmas was quite surprising this year. In that I actually managed to cook something edible (albeit chicken, because turkies were way too big) and de-halal-ise the pudding by stabbing it with a chopstick and soaking it overnight in sherry and whisky. I was very surprised how well that went. It didn't taste like my late grandmother's puddings, but it was not bad at all.

30 January, 2006 19:42  
Blogger archer14 said...

They need 800,000 expats to fork out atleast 500,000Dhs.(guesstimate) on apartments/villas. And they sold close to 8,000 villas last year as proclaimed here

800,000 They will not fill up 1/8th of that!! I was really waiting for the catalyst, the ultimate real estate crash and maybe this just might be the one. I pray that the aftereffects of this crash will bring down the spiralling rents. It's payback time, baby!

30 January, 2006 20:17  
Blogger archer14 said...

If the population of the UAE is estimated at 4 million...they expect 20% of the population to buy these properties?

30 January, 2006 20:21  
Blogger Jenny Foreigner said...

2007 - 2008 will see over-supply in just about every property sector. Residential, office space, serviced apartments... and let's just note that the amount of retail space coming on line will require every Dubai-ite to spenf $7,800 a year in order to maintain - that's contrary to say $500 in Abu D. In resi and office space the crash is likely to be Gulf wide. Over-supply is just as bad in AD, and all of the countries are building the same high-end reclaimed land sell to foreigners expenso-villas. Sales off-plan are now so doubtful that Damac has to offer a Jaguar with every purchase, yet the property companies cash flow depends on off-plan sales. They can't stop building, but they can't keep selling. Interesting times for the property market ahead.

30 January, 2006 20:43  
Blogger Tim Newman said...

...and de-halal-ise the pudding by stabbing it with a chopstick and soaking it overnight in sherry and whisky.

LMAO!!!!

30 January, 2006 21:04  
Blogger secretdubai said...

I'm not sure the worrying issue is so much selling these properties, because there are plenty of international buyers wanting to get in here (the residence visa alone makes it worthwhile for many).

The issue as I understand people buying for investment reasons, anticipating a healthy rental income, could be severely disappointed in the returns they are able to get.

30 January, 2006 22:16  
Blogger Jenny Foreigner said...

SD. I agree about rental income but I'm not so sure about the pool of international buyers any more. Dubai is comparatively very expensive, investment buyers are more likely now to head for China or Malaysia, new markets offer more attractive residency packages and the money you spend in Dubai would get you a beautiful house in Croatia, Montenegro or even in the less built up areas of Spain. The crunch point will come when news of delaying developers spreads overseas. I also think Dubai has a problem if the market slows because the CGIs are so inaccurate. They show each tower isolated against beach or greenery, looking spacious and relaxed. I think we all know that most of the developments don't live up to the graphics...

30 January, 2006 22:46  
Blogger secretdubai said...

I think we all know that most of the developments don't live up to the graphics...

No - very true. In fact what shocked me about JBR is how awful the graphics - in particular the 3D models - looked. If the artists make it look like a concrete hell, what can we expect the reality to be?

30 January, 2006 22:49  
Blogger BrainSyke said...

Ouch! I saw that comming. I guess..who didnt?

30 January, 2006 23:10  
Anonymous Anonymous said...

I have seen photographs of the world and one of the islands that is already built. It looked pretty cool! Wouldnt mind living there.

30 January, 2006 23:39  
Blogger nzm said...

The reason for the car offers is that the apartment prices are too expensive, but as the prices are regulated by the authorities, the developers can't reduce them. So they offer cars as a sweetener.

There are a couple of posts on my blog with comments from various people that also have relevance to this discussion - "Marina Progress" and "Towering Thoughts".

The writing's been on the wall for quite some time. It remains to be seen how creative they can be to get out of it - if they can.

Sooner or later, all of these projects have to be able to show a significant ROI and be self-sustaining, in order to attract the serious foreign investors who need to see fast and healthy returns on their money. This isn't happening here. There now aren't enough buyers who are purchasing off the plans, and the real estate market isn't yet mature enough to have a reseller/2nd time around market.

If it all crashes, you would have to look at who the major investors have been thus far. I'm guessing that it would be our GCC neighbours.

So who's going to come knocking first, to get their dues - and how?

30 January, 2006 23:40  
Blogger archer14 said...

All those investors out there have another problem. The property they buy is not freehold (99 year lease), and this is a major put off. Seems like they might have to go the Ras-al-Khaimah way(theyre gonna sell 100% freehold).

It's said that residents at the Palm would have to cough up 25,000Dhs per year (grapevine?) solely for 'administration' charges, that is the island maintenance, etc. Thats blow no.2.

There's also a specific amount to be paid to the govt. each time property changes hands and this is usually a substantial sum. Blow No.3.

Maybe Donald Trumps 17 buildings might help them bounce back without having to offer ferraris next.

30 January, 2006 23:56  
Anonymous Anonymous said...

Some peopole will continue to buy properties in Dubai. WHO and WHY?
1- IRANIANS: They always want to do business here and take advantage of the booming markets.They transfer all their earnings back to Iran and get around 20% interest per year on their deposits.

2- RUSSIANS: They will always have Dirty Laundery to wash.

3- OTHERS: people who actually beleive the ads. and fall in the scam.

31 January, 2006 08:22  
Blogger nzm said...

This comment has been removed by a blog administrator.

31 January, 2006 08:28  
Blogger nzm said...

Do you really think that Donald Trump has invested here, or is this just another use of a celebrity name marketing campaign - for which he's probably been paid a lot of money to front? (plus free trip here, put up in swanky hotels, entertained, wined and dined - probably lots of golf too!)

I just can't imagine the Don entrusting his money to foreign investment schemes, unless he's absolutely sure that there's a return - and it has to be a big and fast capital gain.

When you look at the Trump Website in his Property Portfolio, there's only one place out of the US that he's invested in, and that's Korea. (I didn't count the Caribbean, as it's practically American anyway!)

In the Future Investments section, there's mention of Brazil, but no sign of anything in Dubai, but then maybe his website is out-dated?!

31 January, 2006 08:35  
Anonymous Anonymous said...

From yesterday's NY Post Page Six -- but which Prince, exactly?

ROYAL TREATMENT

MAN-eating catwalk queen Naomi Campbell has another victim in her claws: the Prince of Dubai. The two are vacationing in Sweden and last week stayed at the Grand Hotel, the most expensive place in Stockholm. On Wednesday night the two were snapped by paparazzi at the Plaza Club after "they had had a lot of drinks," said our spy. The Swedish snappers sound just as reckless as the loose-cannon lensmen racing around L.A. in SUVs. Our source reported, "One Swedish photographer forced Naomi's limousine to drive up on the sidewalk with his car, almost hitting two pedestrians." Kate Moss is expected to join the duo this week.

31 January, 2006 08:52  
Anonymous Trobriander said...

Quite of those posted comments are in line with the realities of the property market and the construction craze in Dubai. However, there is another termite-gnawing gist to it and that is the politically destabilized adjacent regional countries where the USA is waging flagrant wars.

The property market in the ME is 85% politically driven, and there are examples like Jordan when it was a mere village city before the commencing of Iraq’s wars and in a matter of 5 years it turned into a full fledged ‘city’ by solely building for Iraqis & Arabs who were fleeing Iraq and to those who are in the business of wars!

The same example had taken place in Tunisia, Morocco and Egypt for other various political motives and/or neighboring conflicts. Furthermore, the UAE hitherto has not received a ‘terrorist’ blow – keep fingers crossed – which kept market confidence somewhat intact.

Also, do you remember what happened to the Bank of Credit and Commerce International (BCCI) during the 1991 war? Well, it is safer to ramify the color of money.

Form what I know the Saudis are buying in Dubai via phone! The Iranian Mullas and the Iraqi invasion opportunists are paying cash.

AUH is shining its fangs too for a good bite-share of the torso as it is gearing up for a huge development in the next 10 years.

One more thing, for those who are getting their hopes up for a price crash, then think again; what goes up in the ME must go further up, and ‘IF’ price fall ever takes place, then it will be for zoned-out areas where ‘pocket-pinched’ folks could dwell in places like the Guantanamo Gardens.

31 January, 2006 11:43  
Blogger Samawel said...

This is where the big bubble (who Alabbar denies its existence) will begin to burst.

31 January, 2006 11:48  
Blogger Tim Newman said...

...the money you spend in Dubai would get you a beautiful house in Croatia, Montenegro or even in the less built up areas of Spain.

So true, so true.

31 January, 2006 12:20  
Anonymous collounsbury said...

"The same example had taken place in Tunisia, Morocco and Egypt for other various political motives and/or neighboring conflicts."

Eh?

Tunisia and Morocco have zero issues with a property bubble at present, ex perhaps Marrakech. Maghreb is a different world from bizarro Khaliji world.

31 January, 2006 12:24  
Blogger Tim Newman said...

However, there is another termite-gnawing gist to it and that is the politically destabilized adjacent regional countries where the USA is waging flagrant wars.

Actually, I think most market analysts would agree that foreign investment into the region has increased since the Iraq war, especially in Kuwait.

31 January, 2006 12:25  
Anonymous OS said...

They won't get another 800,000 new people to take up those flats, but they just might be able to get many existing tenants to do so. They are already trying to do this by forcing people living in shared accomodation (which I believe comprises quite a big chunk of the population), to move out. This is something that many people had expressed concern over during the census, including here on this blog, and now it seems their concerns were justified. I saw the follwing notice at my building reception this morning, posted by the landlord:

"It has come to the attention of Dubai Municipality, following the census, that many apartments are occupied by more than one family or bachelors, exceeding the capacity of the apartment. Please take immediate steps to remedy the situation or we will not be responsible for any action taken by the authorities"

What cheek! Was it any wonder people refused to reveal the actual number of occupants of their apartments? The Tedad was a total farce - a big waste of time to gather inaccurate statistics.

31 January, 2006 12:29  
Anonymous Abu Bilal said...

OS said
“They won't get another 800,000 new people to take up those flats, but they just might be able to get many existing tenants to do so. They are already trying to do this by forcing people living in shared accomodation (which I believe comprises quite a big chunk of the population), to move out.”

My landlord is trying to do the same to me. Since I’m sharing with a friend, he’s accusing us of subletting. I got a call yesterday saying that he would send the police and put us in jail. My landlord is threatening me with a police raid and eviction while I’m away on business and my wife is alone at home. The real estate agent was an equal jerk about it as well. I want to know something, if the tenancy agreement is in my name but the landlord accepted two separate cheques from my company, one in my name and one in the name of my collogue and house mate, does he have a case? Is sharing really a violation if he accepted the cheques and knows two colleagues from the same company share the villa? The whole case is ludicrous.

My guess is that property prices are going to go down so landlords are trying to vacate the properties by any means and sell them off before the big crash. The legal department of my company think the same thing. The funny thing about this case is that my greedy landlord is also renting to my company’s CEO. What an idiot!

Damn Dubai Greed!

31 January, 2006 13:41  
Blogger Alex said...

Mind you, given that a big chunk of the multibillions gone missing in Iraq reconstruction will have passed through the UAE, the boom might keep up for some time yet...

31 January, 2006 14:04  
Blogger The Lady said...

@ os:
I'm not sure if the ridiculous rent hikes are the city's secret ploy to persuade residents to invest in property. Tenants who cannot afford to pay Dhs.40-60K annual rent are hardly going to invest hundreds of thousands in property. Add to this, the threat of Emiratisation, and really, there's no reason to partake in any long-term investment here...unless ofcourse you're rich enough to have a holiday home.

Those who can't cut it have decided to leave, and the exodus has begun for many.

Such a shame. Residents who have built this city for the past 30 years, now have no recourse but to get on the next EK outta here.

31 January, 2006 14:27  
Blogger archer14 said...

nzm said
"Do you really think that Donald Trump has invested here, or is this just another use of a celebrity name marketing campaign - for which he's probably been paid a lot of money to front? (plus free trip here, put up in swanky hotels, entertained, wined and dined - probably lots of golf too!)"

I got the info from wikipedia, if you go through it, you'll come to know that he hasn't yet cleared his debts. You're right, he was dragged to add some glamour to the property market. It remains to be seen if he'd even build a single tower here, other than one for himself.

31 January, 2006 15:31  
Anonymous Anonymous said...

Everyone's talking about the number of houses, what about the shitty quality?? Has anyone seen Jumeirah Islands?! My aunt has bought a villa and she was appalled ... feels she has been cheated out of her Dubai dream. I feel bad too because she had come to visit me and I had convinced her that you wont go wrong with Nakheel.

I cant understand why they couldnt have used good quality finishes and materials and just get it right! I mean its just a house dammit not rocket science!?

Good luck selling crap built on piled sand which you cant even have full ownership!

31 January, 2006 18:02  
Anonymous Anonymous said...

I dont think there will be an oversupply in Villas... apartments yes, Villas no.

31 January, 2006 18:06  
Anonymous Anonymous said...

About the artist's impressions I agree, many are completely unrealistic and do a good job of fooling people. For example, some show a tower in the marina as being the tallest of the lot when in fact there are 3 towers planned right next to it that are twice as high!

Surprisingly though, the jumeirah beach residence ones aren't too bad. Take this one for example, It's pretty realistic I think:

http://i1.tinypic.com/mwbbr6.jpg

31 January, 2006 21:14  
Anonymous Anonymous said...

Come on all you non-believers!

There may be a price correction but that would lead to a buying opportunity again.

Prices that have gone up by 100% can stomach a 20-30% fall without too dire an effect.

We have apartments in the Marina, and are sincerely enjoying the experience.

Does anyone here think Dubai or the one person who owns it, is not monitoring the scene and ensuring no embarrassment befalls him or his little project?

Rents may be taking their toll, and will settle but gain some truly objective perspective.

Perhaps Jumeirah will outprice the vast majority of expats?

Areas of London that are now for the exclusively filthy R, were once for cabbies and grey hound racers.

Mews houses in London that once housed servants (gone to check maids room!)are multi million pound nests.

The simple fact is areas in Dubai that we are all used to being rightfully ours may never be again.

There may be a shift to more tertiary dwellings for us who were used to being able to rent a villa on a beach, past the chalet shwarma joint on JB Road????

Things change don't get bitter.

xxxx

31 January, 2006 23:01  
Blogger Mazhar Fakher said...

I'd like to take you back to Hong Kong in the 1960's... You have to be a millionaire now to own a house (villa) their. This slowdown is just a blip. Dubai sits next to a market of 2 billion increasingly wealthy consumers who live in countries that don't come close to offering the type of infrastructure Dubai offers.

31 January, 2006 23:47  
Anonymous Anonymous said...

The Trump name is just for branding. Nakheel's paid up all the capital. It's a way of paying for using the 'Trump International' name.

01 February, 2006 11:42  
Anonymous Anonymous said...

Freehold law is coming

http://www.gowealthy.com/realestate/news/861/detail.asp

So thats one concern (hopefully) struck off the list.

Also in my view everyone loves to whinge about property.

The Criticism Dubai receives is truly dwarfed by the criticism the UK receives.

Economy and property in the UK are the most popular topics on www.fool.co.uk, vast majority claiming the end of the world type thing.

While we await infrastructure and finishing in Dubai things might not make sense.

And to the person with the villa in Jumeirah lakes, I am sorry that the finishing was so shoddy, by all means (however) I would be keen to take your burden off your hands.

I'll pay up all your costs plus an extra 20% for the inconvenience caused.

01 February, 2006 13:41  
Anonymous Anonymous said...

On this topic see this sunday times article from a couple of weekends ago - seems the word is spreading...

http://www.timesonline.co.uk/article/0,,2098-1996116,00.html

01 February, 2006 18:58  
Anonymous Anonymous said...

About the jumeirah islands villas, I know someone who has bought there and they're actually happy with their purchase. According to him the meadows, the springs, etc had a lot more problems.

01 February, 2006 23:16  
Anonymous Anonymous said...

the law is coming the law is coming
and all the lands people flocked around and looked at the sky
for the law to one day come down from up high
but everyday they went home with their heads hung
for there was no law except for confusion.

02 February, 2006 14:44  
Anonymous Anonymous said...

I have been asked to invest in a private fund that is positing itself to buy thousands of flats at a 40% discount to the market. Currently Off Plan speculation is running at around 40%, that means only 60% of all properties are going to be actually lived in!. Couple this with the glut of residential accomodation coming online at the end of this year and you have one hell of a supply over demand issue. Its really Economics 101. Things are made worse because this property market is not operating with any fundamental integrity. There is a lack of price transparency, lack of real legal clarity, lack of any contracting accountability, lack of any stakeholder consultation, sensitive to geopolitical events, and ramped by coordinated rent rises guided by the government which allows landlords the ability to operate as an illegal cartel.

Dubai is smoked and mirrors once people realise is can't deliver on its hype its investment reputation will wane...think time share fraud.

As rising commodities markets suck up more capital, the stock market will be a leading indicator of a property price correction. Look for a sustained fall perhaps over three months to four months in the Dubai stock market.

03 February, 2006 22:16  
Anonymous Anonymous said...

The VISA status of those buying properties is still UNANSWERED!
Maybe Dubai and Abu Dhabi can't reach agreement on it yet, but the situation for now is the builder sponsors the buyer (at a price) for the first few years and after that ..the buyer is cut adrift ...could be deported, fined for overstaying or banned! Dear oh Dear .....Time to legislate UAE and get your act together regardles of how many free jags are on the offer.

08 February, 2006 18:30  
Blogger boostah said...

whos this annonymous dude show yourself oh agent of property

25 February, 2006 06:43  
Blogger the arab lady said...

The Arab lady,

For all who is not happy with the process & life style in Dubai.... let me tell you Dubai- UAE is the best place ever in the world to live. Good high class life style……..,All of you no matter where you come from did not ever had this life style before, and if you
Had!!!!U need to pay taxes for it...

Dubai is the place where all races, colors, religions; languags are respected AND SAFE TO LIVE.
The only place in the world u could sleep with Ur villa gates open.
LET ME TELL ALL THE CRITICS WHO R NEGATIVE ... CAN YOU FIND THE SAME IN YOUR COUNTRY? IF YES!! THEN WHAT MAKES YOU COME HERE? AND WHY YOU ARE STILL HERE?!!!!
PISS OFF TO YOUR COUNTRY.

10 June, 2006 14:32  
Anonymous Anonymous said...

"Dubai is the place where all races, colors, religions; languags are respected "

Not so sure!!!

I never saw a country with so much racism and injustice between deferent nationalities and color.

If you want to feel yourself stranger, come to Dubai.

Don’t worry! We will leave your Dubai.

11 February, 2007 19:44  

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