Dubai Bubble Bursts

[monsi]

Dubai is wonderful and very pleasant to live every body knows this.

But the topic is about the bubble.

I am asking about the bubble because every one of you wants to make money out of his property.


1 All of us know that the market will pick up again and prices will go up but when?

2 How far are we away from the bottom?

3 When will hit the bottom?

My prediction

1. 2012
2. 20%
3. mid next year

The forum has attracted a lot of panic merchants hence the reaction.

To be fair to the pessimists the bubble has burst for the flippers.

I think the frenzied buying and selling has stopped and some sanity (and some greedy opportunistic scavenging) has entered the market.

In answer to your questions, I don't believe there are across the board answers.

My rule of thumb is - the further away the completion the slower the recover the deeper the fall in price.

People and lenders will be very leery of anything that is still on paper or offered by small developers.

Properties that are habitable or almost habitable have probably hit bottom and will start rising again as we move from this year into next, but for this to happen mortgage availability must increase.

 

[georgihh]

The forum has attracted a lot of panic merchants hence the reaction.

To be fair to the pessimists the bubble has burst for the flippers.

I think the frenzied buying and selling has stopped and some sanity (and some greedy opportunistic scavenging) has entered the market.

In answer to your questions, I don't believe there are across the board answers.

My rule of thumb is - the further away the completion the slower the recover the deeper the fall in price.

People and lenders will be very leery of anything that is still on paper or offered by small developers.

Properties that are habitable or almost habitable have probably hit bottom and will start rising again as we move from this year into next, but for this to happen mortgage availability must increase.

Have you notice the Topic City of Arabia.
Those guys are still talking about the future, How the metro is going to run inside the COA , How this place is in the center of the planet, How they will make money ones this place is built, they even started predicting the rents for 2014
And all of them lost money and they know it but they use this forum as fulfillment.
As far as these people exist and most of the people in the forum dreaming about the future we will get nowhere and we will lose money, and the new dreamers will come
Basically this is Dubai – enjoy your time if you are in Dubai.
I am telling you this things, because I have been in Dubai for some time and know how the things works

 

[monsi]

Have you notice the Topic City of Arabia.
Those guys are still talking about the future, How the metro is going to run inside the COA , How this place is in the center of the planet, How they will make money ones this place is built, they even started predicting the rents for 2014
And all of them lost money and they know it but they use this forum as fulfillment.
As far as these people exist and most of the people in the forum dreaming about the future we will get nowhere and we will lose money, and the new dreamers will come
Basically this is Dubai – enjoy your time if you are in Dubai.
I am telling you this things, because I have been in Dubai for some time and know how the things works

georgihh

I basically skim over anything that I think may be trying to manipulate the reader.

I still stand by my rule of thumb, if it isn't ready or almost ready it is going to fall further and for longer. So anything that means 'jam tomorrow and not today' isn't going to be very attractive - limited trust means limited patience.

There are the people who are quite obviously softening people up so that they can sell to them. They may be agents or simply people who got in too deep or with too many off-plan units.

Then there are the speculators who have worked out which properties will give them the highest returns as quickly as possible.

These guys are rustling the bushes so that they can pick off the right properties. They do this by trying to spread as much fear as they can so that they can then step in as a saviour to take the property as cheaply as they possibly can and also leave the seller feeling they have done them a favour.

When people are running around like headless chickens the trick, I think, is to take almost all opinions with a pinch of salt and try to understand the motivation behind the opinion.

Sentiment will drive the market that is true, but the Dubai situation would be much worse if the Dubai market was the only market in the whole world that was experiencing a crisis of confidence.

In relative terms Dubai seems almost steady. People are probably reacting because they misguidedly thought Dubai would escape unscathed. That wasn't going to happen.

Some of Dubai's issues are outside their control - oil price; exchange rates; etc. However, as Dubai is not a democracy, it is better positioned to quickly and aggressively attack some contributory factors that are weakening its property market - mortgage availability; off-plan over-supply; etc.

I am not suggesting denial - I am however suggesting a little more calm.

 

[Wannaberich]

What goes up must come down and vice versa.We can all spend hours and hours analysing,analysing,analysing but at the end of the day we all know when the global economy picks up then so will Dubai.
Dubai will not crumble,dissapear or collapse whilst the rest of the world prospers.Nor will it swim in success whilst everywhere else suffers economic failure.So all you foreign journalists
laughing in the background,get real.
Anyone who called it right before everyone else then give yourself a cigar.Its called luck.
Anyone who thinks they know exactly how its going to go, then again,its just guesswork.
All thats sure is that prices will go upwards again.

Meanwhile,as has been said,this will be a period where we hope alot of the rubbish will be cleaned out of Dubai.The flippers,speculators,crooked developers,gangsters,mafia whatever.Also,the crazy onslaught of launch after launch after launch has come to an end which is good.
Building without thought for the structure and wellbeing of Dubai and just
for some greedy developer to make some money isnt good.
Dubai can catch up.Finish U/C projects before starting the next.Getting the infrastructure well underway.The metro,buses,DEWA supplies which could barely keep up.Internet,phones,whatever.Let all this catch up a little and then lets build with a more sensible and thoughtful approach.

In a few years time we might look back and think the financial crisis that has hit the world and now Dubai, is the best thing that ever happened for the sake of its future.

 

[eyeC]

Dubai Bubble Bursts - It’s official, but how far will it fall?
After months of press releases and government promises that there will be no such thing as a bubble in Dubai,

Dubai Bubble Bursts - It’s official, but how far will it fall?

its different this time


how far will it fall?it should come back to the same starting level sometimes lower depends

research the following (thank you Google)

the south sea scheme 1721

Victoria land boom 1880

Florida property bubble 1925

dot-com bubble 1998

Poseidon bubble 1970

world housing bubble 2005


definition of a Bubble=A bubble exists when assets price inflation rises beyond what incomes can sustain

it follows the bell shape curve they teach in o level statistics

if it took 5 years to reach the top in Dubai market(since 2003) it needs about 5 years to reach the bottom

 

[aviduser]

OK you think I talk crap but we shall see who is right. The Atlantis is already slashing room rates and occupancy is lower than expected.

The problem with a bubble bursting is that it is very hard to reinflate. Look at the dot com bubble the NASDAQ was at 10,000 during the bubble and even before the recent crash never even came close to approaching those high levels.

The problem with Dubai is that it HAD to achieve critical mass BEFORE the bubble burst, in other words enough businesses not connected to property had to have moved into Dubai to keep up demand and make it become a must BE place for business. Dubai needed to steal business and banks from Hong Kong and Singapore. It never achieved this.

Instead everyone driven by greed forced prices for rent way past market values and property followed. Any business initially drawn to Dubai was put off, why ? because they knew that they would struggle to attract the right sort of quality staff to such an expensive and unknown destination. This meant that the cost of setting up an office would be prohibitive and in an age of internet email and teleconferencing business didn't have to goto the expense of setting up an office here.

The property market was driven by pure greed and hubris, the fundamentals of supply and demand simply did not add up, and I am talking about things BEFORE the credit crunch.

Dubai never really had the demand for the property being built, holiday lets were one pipe dream that never came to fruition, after all why rent a flat for a week when so many hotels were on offer (or going to be on offer). A new airport might employ 135,000 people but I bet only a small fraction of that number 5,000 perhaps would be able to afford ANY of the expensive flats being built.

This is essentially Dubai's major error. The completely uneven distribution of incomes. Dubai claim thousands of new people join Dubai every day, but how many of these are well paid professionals and how many are lowly paid construction workers.

Now if Dubai inc. decided that perhaps everyone was equal and paid fair wages to more people perhaps more people could have afforded to live the Dubai dream. But greedy and short sighted locals thought they knew better.

I have said before to many people Dubai did not have to be this way, they could have decided on a long term 20 year plan, built infrastructure, power, roads, water and waste. They could have slowly built up housing stock to a level to meet demand THEN offered it for resale.

They could have built office towers to meet DEMAND not for speculation.

The list goes on....oh and and building ANOTHER airport to give one CIty 4 times the capacity of HEATHROW. Just think about it, think logically about it, think of the fundamentals. How many people live here versus the UK ? Come on, can you seriously not know in your heart of hearts that the only thing driving this was greed and stupidity.

When the dust settles what will be left ?

People move on, resorts fall out of fashion, another hot spot will be found, Dubai has had it time in the Sun, people have made money and moved on, others are stuck and lost everything, the ones who made money will move to the next place a repeat the story. Then names will change but the story won't.

 

[monsi]

aviduser...

If you are so disgusted with Dubai why are you expending so much energy writing these posts? Why bother? What purpose do they serve?

Is it cathartic? Were you unable to buy or did a developer run off with your money?

They just make you look like someone who has an axe to grind.

No place is perfect, Dubai is no exception. I've lived in a few places and can find many faults with all of them.

But your posts just come across as bitter and vindictive. They come across as a desperate desire to see Dubai fail and for many people to suffer - and not as any reasoned analysis.

Again, what are you hoping to achieve?

 

[eyeC]

i think aviduser is right price did go up fast in a short period of time because of

greed and money supply

 

[aviduser]

I am not bitter or vindictive

And this might surprise you but I actually made money out of this fiasco. I don't want Dubai to fail but at the same time I really don't see now how they CAN'T.

I think vitriol should be aimed towards the rulers of the Country who clearly have NO IDEA what they are doing. I also blame Western advisers who have clearly been lieing to them to ultimately line their own pockets. After all what banker or architect is going to tell you that your growth is unsustainable if you are taking money to build a City, power plant, Tower or airport. Of course you are going to say that tourist numbers will continue upwards of course you will say rents are justified.

The problem with Dubai was their MONEY. When people see you have it everyone has their hand out and EVERYONE GOT GREEDY. You need a new airport you need the tallest tower you need a dozen theme parks everyone was in on it , hoping that they could get in and out before the money ran out.

I feel really sorry for investors now. These are the small investors, the big ones are already well out of the market, now the latecomers are being stung. These people may have invested life savings and that's not funny.

Other Cities grew out of nothing and thrived without this sort of rampant greed and stupidity, Hong Kong and Singapore are two good examples. Those cities have never tried to prove they are the biggest tallest richest or whatever, they just concentrated on the fundamentals.

Greed destroyed Dubai and we are ALL to blame.

 

[Wannaberich]

Aviduser your post is so one sided it tell some your one bitter individual.This is one most people will discard your posts because they can see you for the ignorant person you are.

What I would like to know is if your so anti-dubai why are you spending so much time on this forum writing your crap?
I'm all for people posting their opinions,good or bad,so long as its balanced.Yours isnt.
You only can see the bad.
Here's a test for you.You've bored us all with your negativity,now come back and tell us what is good about Dubai and its future?
Surely even you can find something?

 

[aviduser]

Positives

If all projects not started STOP including hotels and Palms.

Then and only then Infrastructure needs to be improved, waste obviously is a problem.

Right once that's straight Dubai should then forget about being this ridiculous massive tourist hub and concentrate on niche tourism, extended business breaks and the like.

Expand the free zones, this is one of Dubai's master-strokes considering all the cock ups free zones are the number one thing that COULD make Dubai a very viable Business hub.

They have to reign in the rest, forget theme parks Dubai land and more massive malls. They need to get back to basics, trading.

The locals also need to take a MASSIVE dose of medicine and start giving some respect to the people building the place, and I don't mean the wealthy westerners I am talking all about all those thousands of Indians Filipinos and the like who toil in offices and work sites all over the Emirate.

If they were paid a minimum wage much of this excess property would be soaked up by people who would feel empowered and invested in the Country and not just working to send money back home.

 

[TommyC]

Speaking of balanced, multi-sided stories:

Imagine 10 years down the line.
A finished metro system.
The two tallest buidlings in the world,Burj Dubai plus Nakheel Tower.
Another 7/8 'Supertowers'.
Two fantastic airports.Possibly the biggest airline company in the world,Emirates.
The two biggest malls in the world.Dubai Mall and COA Mall.MOE with the ski slope.
3 finished and inhabited palm islands.The magnificent Palm Jumeriah with Atlantis,QE2,Trump hotel.
Dubailand with a number of operating theme parks and attractions.
Al Bawadi well underway.
A thriving Business Bay.
Arabian Canal completed and with many buildings under way/finished.
Waterfront well under way and including theme parks etc.
Countless fantastic and opulent hotels,clubs,bars,cafes,restaurants.The
fantastic promenade of shops,bars at JBR.
Dubai Marina.
Beaches and sun.
Sports city with its many events.

God,who won't want to live here !

Just so we don't miss all sides of the story here. On top of that, have heard an increasing amount of rumours (yes, rumours) that Etihad have bought a significant part of Emirates...which, if true, would make perfect sense for the future (time to stop the pissing contest in favour of sensible, smart, sunstainable solutions).

 

[Wannaberich]

Speaking of balanced, multi-sided stories:



Just so we don't miss all sides of the story here. On top of that, have heard an increasing amount of rumours (yes, rumours) that Etihad have bought a significant part of Emirates...which, if true, would make perfect sense for the future (time to stop the pissing contest in favour of sensible, smart, sunstainable solutions).

Agreed.Two major airlines competing against each other and so close doesnt make sense.

 

[monsi]

And this might surprise you but I actually made money out of this fiasco. I don't want Dubai to fail but at the same time I really don't see now how they CAN'T.

I think vitriol should be aimed towards the rulers of the Country who clearly have NO IDEA what they are doing. I also blame Western advisers who have clearly been lieing to them to ultimately line their own pockets. After all what banker or architect is going to tell you that your growth is unsustainable if you are taking money to build a City, power plant, Tower or airport. Of course you are going to say that tourist numbers will continue upwards of course you will say rents are justified.

The problem with Dubai was their MONEY. When people see you have it everyone has their hand out and EVERYONE GOT GREEDY. You need a new airport you need the tallest tower you need a dozen theme parks everyone was in on it , hoping that they could get in and out before the money ran out.

I feel really sorry for investors now. These are the small investors, the big ones are already well out of the market, now the latecomers are being stung. These people may have invested life savings and that's not funny.

Other Cities grew out of nothing and thrived without this sort of rampant greed and stupidity, Hong Kong and Singapore are two good examples. Those cities have never tried to prove they are the biggest tallest richest or whatever, they just concentrated on the fundamentals.

Greed destroyed Dubai and we are ALL to blame.

Have you looked at the property price history of Singapore and Hong Kong?

We have one property, we reserved it in 2005 and we bought it because we fell in love with Dubai - warts and all.

We love the east/west mix of Dubai. We love its bigger than reality dreams.

We love the fact that this tiny emirate has changed the face of the region and transformed itself in less than two decades.

Rapid change and rapid growth has its own inherent problems and infrastructure, whether this is legal or physical, is going to have to catch-up.

There are things that really irritate us about the place.

How people exaggerate and over sell everything. How when someone tells you they are going to do something or they will call, you have to learn to expect that they will not.

The sectarian attitude to people, jobs and wages - I find painfully unfair.

Dubai has many pros and many cons, but if it were a person, compared to other countries it is barely a toddler and as toddlers go, it is a pretty precocious one and thriving.

It is healthy for Dubai to have a had a little shock to its system - it will have to take stock and think about what it has to offer and value the people (including all the incomers) that make it what it is.

That said, your doom and gloom and sheer negativity is not constructive.

I am not suggesting blind faith or denial.

I would rather expend my energy working together to make our voice heard.

Whining and ranting in such a destructive fashion is just going to get you ignored.

 

[georgihh]

The bubble has burst that’s for sure and everybody will calm down.
All the money which have been circulating in Dubai for more than a year are gone.
Now back to normal the prices will go down the salaries will go down and any bubble which was created recently in Dubai will burst if not already.
The demand and supply will equal and the life will be as good as it was 2 years ago.
The madness is almost over and whoever lost must start again and try to recover his money.
All the prices will go to a level where you can earn 10% from rent per year from the current property prices.
Unfortunately off plan has lost the creditability and people will be very caution to gamble on this.
That’s my prediction for the next 2-3 years.
Having said the above if the rents generate you 10% per year you can recover your capital in just 7-8 years – good business, and the property will be your profit.
If we have not enough cash just get some good friends and invest together.
As far as I know up to four people can own a single flat

 

[sasherwani2]

My predictions...


Imagine 10 years down the line.
A finished metro system (True but very few takers due to the crotching heat and lack of "reliable public transport" leading to the metro.
The two tallest buidlings in the world,Burj Dubai plus Nakheel Tower (Nakheel Tower will be cancelled)
Another 7/8 'Supertowers' (All Meraas "supertowers" shall be cancelled, Meraas will most probably never finish any project. Poor planing! Bad timing! Wrong attitude!
Two fantastic airports.Possibly the biggest airline company in the world,Emirates (Emirates will declare banktrupcy in the next 3 yrs)
The two biggest malls in the world.Dubai Mall and COA Mall.MOE with the ski slope (Two biggest malls and no shoppers.. have you been to Dubai Mall lately? The traffic inside the mall is hopelessly low now even during the Eid season! COA will obviously be cancelled.)
3 finished and inhabited palm islands.The magnificent Palm Jumeriah with Atlantis,QE2,Trump hotel (There will be no Palm Jebel Ali and absolutely NO PALM DEIRA)
Dubailand with a number of operating theme parks and attractions (Most of the parks are already cancelled Legoland, freej etc)
Al Bawadi well underway (Really? I wanna some pictures )
A thriving Business Bay (Business Bay prices collapsed long before the UAE market crashed)
Arabian Canal completed and with many buildings under way/finished (Arabian Canal project will be cancelled by 2009)
Waterfront well under way and including theme parks etc (The waterfront will be just 1/20th of the size originally planned)
Countless fantastic and opulent hotels,clubs,bars,cafes,restaurants.The
fantastic promenade of shops,bars at JBR (No takers)
Dubai Marina. (Deserted... so many buildings with such low occupancy..wont work forever)
Beaches and sun (Sand and heat)


God,who won't want to live here ! (Who=All of us in 5 yrs)

 

[dubister]

I have a concern. I notice many people on this forum, typciall the VERY VERY PRO Dubai ones refer to Dubai as if it is a person. For example, Dubai shall recover, it wil come of its misery... etc etc et..

What I always wonder is who is that DUBAI that is running the show. It is simply the power of collective all, including us. Or is it a select few with visions and leadership. I tend to believe it is the collective power of us all running the engine... what do you guys think? Because surely theis crash or bubble burst or busted tire or whatever you think it is, is getting worse, and I have yet to see one official representation of it? Am I missing out on something?

 

[PropGuy]

Possibly the biggest airline company in the world,Emirates (Emirates will declare banktrupcy in the next 3 yrs)

Thats hilarious

 

[sasherwani2]

Thats hilarious

A lot of "hilarious" things to come "PropGuy"... I was predicting this "crash" two months ago when everyone was laughing at me calling me 'negative' and 'pessimistic'.

 

[aviduser]

I don't think Emirates is going bust

That rumour about Emirates and Ethiad merging is actually one of the most senisble things I have heard out of the Country. It's like Bristol and Bath having their own airlines, totally pointless. A merger will make them stronger and be a genuine threat to the majors, the question is who will swallow their pride and lose the name, I am guessing Etihad as it's smaller.

Look if all the projects planned were cancelled and the Palms yet to be built then this is a good thing. Dubai needs to get back to basics, if they are lucky they will survive this period and still be a decent business hub. That is all they ever should have been, the rest was just madness as mentioned above.

I mean theme parks you can't use 6 months a year ? come on no one was gonna fall for that.

Apart from the fact that many people are going to lose money this is probably the best thing that could have happened to the region.

The economist article asks if there will be suppression or reform. I am betting suppression. The rulers have squandered far too much money for their to be any real honest reforms, after all if the locals start going bust they are not going to take kindly to finding out how much their rulers just paid for another SUPER yacht