Dubai, A Quiet Crash?

[Dubai]

I know an estate agent and a mortgage broker out here.

News just in.... flats are not selling too well. In a huge development between the Burj Al Arab and the aluminium plant at Jebel Ali, the broker has just been advised by agents that 2 bed flats (brand new) that were on for AED 1.85M (about GBP265k) have now dropped to AED 1.4M (about GBP 200l).... a huge drop.

The banks are now apparently reluctant to lend against flats, and prefer villas.... so no signs of those dropping just yet.

[Seeker]

I know an estate agent and a mortgage broker out here.

News just in.... flats are not selling too well. In a huge development between the Burj Al Arab and the aluminium plant at Jebel Ali, the broker has just been advised by agents that 2 bed flats (brand new) that were on for AED 1.85M (about GBP265k) have now dropped to AED 1.4M (about GBP 200l).... a huge drop.

The banks are now apparently reluctant to lend against flats, and prefer villas.... so no signs of those dropping just yet.

Hi, do you have more info about that ? I was reading up a lot about that and all and everyone predicted this to happen in 2007/08. What do you think will the overall outlook for investments in Villas be ?

I've been seing some 2 BR villas in the Springs and the renting price went up from 90K to 130K from 2006 to 2007.

2 BR's are on sale for 1.8 mill. Do you believe this is still an good investment for the next 2 to 3 years ?

I'm moving over to Dubai just now and really would rather buy then rent.

Difficult decision to make.

Thanks

Edited May 27, 2007 by Seeker

[Dubai]

Seeker

That's a tough one. First.... do your own research!!

Here's some food for thought:

The head of a massive shipping agency (Kanoo) called the top of the stock market acurately a while ago. He did an interview last year (do a google) and predicted massive collapse of the property market here starting Q1 2007. His thoughts were based on massive over-supply, and the fact (then) that 80% of every property sold was purchased by speculators.

However, since then, the government have announced plenty of ambitious projects, including a sort of disneyland. Halliburton are setting up shop here and meant to be bringing 10,000 employees with them.

Far from dropping, rents are hurtling upwards.... a 3 bed villa in a nice part of town will set you (or your Company) back at least AED 250k (GBP36k) per annum.

A lot of people from less hospitable parts of the middle east are buying.

In short, my gut feeling is flats are going to have a serious correction. That seems to have started. Villas may take longer, but I'm sure it will happen. There are only so many people that can afford GBP650k for a 4 bed villa in an area that looks like a council estate!

Because the market is new, it has no real anchor or direction. Any EA will tell you to buy, imagine my surprise.

The bottom line is if you find a place you like and can afford, and think is reasonable value for money, go ahead. But if you stretch it just to get onto a wobbly ladder, that's your own lookout!!

On a final note, I know plenty of people that have been here for over 15 years. None of them are interested in buying, even using rent allowance to pay the mortgage. They don't see it as a sensible option just yet.

There will be contrary views..... you have to get here and make your own mind up.

[ice]

Hi, do you have more info about that ? I was reading up a lot about that and all and everyone predicted this to happen in 2007/08. What do you think will the overall outlook for investments in Villas be ?

I've been seing some 2 BR villas in the Springs and the renting price went up from 90K to 130K from 2006 to 2007.

2 BR's are on sale for 1.8 mill. Do you believe this is still an good investment for the next 2 to 3 years ?

I'm moving over to Dubai just now and really would rather buy then rent.

Difficult decision to make.

Thanks

Hi,

I think that if you have a 2-3 year horizon predicting the direction of prices is incredibly difficult. There are many opposing factors in play. I think that the Springs have risen dramatically in the last few years and some people have tripled the original price. If the markets slows then some of these people may take 10-20% discounts (losses) and sell knowing that they have healthy profits.

Also there have been so many delays with projects that were supposed to come online last year which are not even half ready. This disorts the supply. Some of these like Jbr are coming online now and the others will come available this year and the next year. Such factors should cause prices to fall.

However dubai population is 1.3million and growing. It is getting new infrastructure and the economy is growing for the meduim term anyway. People from mena and europe are purchasing property for work and lifestyle reasons. The mortgage market is just developing. Such factors should cause the price of property to rise.

To come off the fence i really do believe that prices will rise in some areas and fall in others. Off plan projects will be the most riskiest. However i do think that projects that are completed will not fall in prices but just stagnate for the next couple of years. My suggestion is that if you are coming to dubai for 2-3 years then if your company pays the rent, the safe option is to look around and rent. If you are paying the money then you can choose a more riskier strategy. You could buy a 2 bed villa which is nearing completion and use it for 2-3 years. The savings in rent should hopefully exceed any fall in the villa price.

At the end of the day you have to make a decision that you feel comfortable with.

Good luck

[Seeker]

Thank you so much for your reply. It's really good food for thoughts. I also found this forum based on

info you provided above:

http://www.dubaisharetalk.com/viewtopic.php?t=1477

As usual and to keep things difficult, opinions are nicely split between UP, On the Fence or Down.

Interesting new article for an UP trend from today !

I'll just keep looking, but will have to make a decision soon. I've always been a bit of a risk taker, and

personally I do believe that a 2 or 3 bedroom Villa in the Springs would be benefitial to buy. As you stated

above, maybe not for 2-3 years but I would need to reset my expectations to a longer term plan.

I would be quite unhappy to throw away 130-160k every year, this could very well be better invested.

I don't see any new Villa developments impacting the Media/Internet City area too much. It's already very crowded

around Internet/Media City, traffic is not going to improve too soon, so people like myself will keep looking

for near accomodation.

I've been to Arabian Ranches with an Estate Agent last week and working in Internet City, this was already too far for me.

And they are really expensive objects.

We'll see how it works out. In anyway all good information and views provided, thanks for that !

Seeker

Edited June 3, 2007 by Seeker

[viewdubai.co.uk]

People are talking about a crash in Dubai, and in certan parts of Dubai this is true. The old saying "Location, Location, Location." I have property in freezones which is retuningg profit on investment of 50% conservatively over 3 years (residential) and 70% conservatively over 3 years commercial. The savy investor is still investing in Dubai, as so many large multi-national comapnies have done.

The freezones are the key. Property in the freezones is still making excellent investment. Areas outside freesones are struggling,as land in freezones is hard to come by. Picking the right developer with teh right investment specialist key. The freezone property will contiue to be a great investment opportunity for all whether investing £50k or £5million or more.

viewdubai.co.uk

[expatowner]

Dont buy.

The place is one big building site that will remain empty long after the builders leave.

Rent is the only way to go in Dubai.