Dubai property prices to fall 10%

[iced]

correction

Very well said. Don't be suprised if it corrects more than 10%. The article in the paper on the correction itself would have set a panic in the market with people wanting to off load.

Dubai is like any other property market and does not have special rules. Property markets are cyclical in nature and you cannot expect it to go up forever. People buying at high prices will have trouble round the corner.

When you have 1000 wanting to unload at the same time and when it takes time to sell considering that property can be sold in a day sometimes or might have to wait for a year, they start panicking.

If I had money to invest, I would not invest now as the prices are outrageously high. I would wait for the distress sales to come in and pick up at bargain prices.

Don't forget in distress, it's the other way round. The buyer is not motivated. The seller becomes motivated and at times would agree to the most flexible payments just to get out of the mess.

Let's put it this way...Dubai might be building too much

Regards

Roshan

Very good points. I think that as the market loses its liquidity and banks tighten up on credit then the market will fall rapidly. Greedy developers are launching at high prices, not completing existing projects,delays in delivery.

Prices wil fall as the dollar strenghtens and banks restrict lending. Rents are too high and if subletting was not tolerated then prices and rents would fall.

Dubai is another Hong Kong Singapore and prices will fall and even crash once the speculators leave. Give it time. The stock market rapidly fell.

Originally prices were low but now they are very high based on indicators such as wages, income expenditure etc.

Theonly question is how much and when will they fall

 

[Demoniise]

I think people who are buying for the long term rather then speculating ie for renting or to live in will benefit and will not suffer as much in the long term. Those people who bought early and are sitting on freeholds without any debt will ride this downturn the best

 

[Wannaberich]

For me if I was thinking of investing in another Dubai property right now,my main concern would be the developer of the project I was looking at.
Choosing the wrong developer when you read some of the horror stories on the websites is more worrying than what is going to happen with prices.

 

[Roshan]

I think people who are buying for the long term rather then speculating ie for renting or to live in will benefit and will not suffer as much in the long term. Those people who bought early and are sitting on freeholds without any debt will ride this downturn the best

It's my understanding as well. If you have no debt on a property, it becomes a gold mine and a sure way to ride the down turn. When there is no debt and bought early, you don't care where the market goes or how much it falls.

Regards

Roshan

 

[Roshan]

What the article fails to mention is unlike Singapore, Dubai has a government that is committed to developing the business and tourism sectors for the next 10 years.

Once the major tourist attractions such as Dubailand open there will be a demand for properties at an end user level that will far exceed anything Dubai has yet experienced.

Singapore are the pioneers in open market philosophy. Dubai has learnt a lot from Singapore.

Roshan

 

[Asyah Rajah]

The best investment in my opinion would be Abu Dhabi as its never going to be over crowded like Dubai is. As the capital of the UAE, and the richest state, its much more exclusive as the prices are higher. The government of Abu Dhabi don't want to follow in Dubai's footsteps as they have around 90% of the whole of UAE's oil reserves.
Also, they have just introduced 50% capital gains tax for investors who flip in a short period of time. Not sure what the time scale is, but they want people to holdon to their properties. This benefits long term investors hugely!

 

[Roshan]

The best investment in my opinion would be Abu Dhabi as its never going to be over crowded like Dubai is. As the capital of the UAE, and the richest state, its much more exclusive as the prices are higher. The government of Abu Dhabi don't want to follow in Dubai's footsteps as they have around 90% of the whole of UAE's oil reserves.
Also, they have just introduced 50% capital gains tax for investors who flip in a short period of time. Not sure what the time scale is, but they want people to holdon to their properties. This benefits long term investors hugely!

Abudhabi is a flippers paradise again. How do you think the prices shot up to Dhs 2500 psf. Buying at that rate does not make sense

Regards

Roshan

 

[Fran]

Sharp price correction is not expected!

In June prices were skyrocketing and people were talking about the second Dubai real estate boom.
Now, in the beginning of August, we fear price correction...
That's the business with all it's ups and downs: seasonal trends, bad/good publicity, speculations and all the rest

Today article at the Dubai Chronicle says that correction is not expected:
Real Estate Sector in Review: Sharp price correction is not expected! : Dubai Chronicle

I tend to agree with the article as it sounds quite reasonable.

 

[dubaizone]

If you look at global property markets - there is seldom a decline in property prices (the US being an exception because the prices are dropping because of a subprime crisis and not due to supply demand stats). Property prices usually stagnate in a market where supply of property exceeds demand - this happens until the demand catches up and then prices start climbing again. Even in this scenario the 'prime' areas of any city hold or continue to appreciate in value. Therefore it all depends on identifying the right location and investing the right amount into it. In dubai there are currently many potential hot zones that will continue to increase in value even if the supply exceeds the demand - take downtown dubai for instance - it is the only real freehold project that is actually within the heart of the city. Certain elements like DIFC, Convention Centre, Emirates Towers, The Burj Dubai, Dubai Mall etc will continue to attract commercial interest and continue their business and trade activities and whereever business and trade occurs people prefer to live around it and therefore Downtown Dubai makes a fantastic investment today. Same goes for any development that is near or in proximity to a commercial / business center.

 

[iced]

If the UAE is serious about inflation and restricting easy loans then prices have to moderate in rise or even fall. Other asian economies are slowing down. Ajman and other emirates will begin to deliver alternatives in a couple of years.

The low end of the market is now expensive in buying or renting. One should really be cautious if buying now especially off plan

 

[SeaHorse]

The Investment Calculator

I wouldn't say it is "fool proof" but I would say the indications are positive, at least for the foreseeable future. As for the term (invest smartly) I advocate the same by saying use "due diligence".
By due diligence I mean researching the market. Whether you are seeking a studio, one bed, villa or even commercial properties the same rule applies. You need to understand the location.. is it suitable to your type of investment? What will be my view?. For example "sea facing" is not the same as "sea view". What is the current market rate, usually expressed as per/sqft. What is the Cap Rate for similar properties in the same vicinity? Would I be buying at above or below the market rate? What amenities are offered? Are there any further fees such as "service fees" How much will they cost per annum? What is the expected delivery date? and what is the likelihood of delays. What about surrounding projects? have these begun? and will I be affected at a later date with noise pollution? What is the track record of the developer, both past and present? And does the project have nearby transport links, if not will it in the future?

This is a general guide to the due diligence I do personally. It might sound like a lot of research, but in reality it is not.

I can assure you from experience that it does pay in the long run...

I have created a property investment calculator with several modules and guides to investing. If you think it would help, PM me and I will send you a copy.

Please email me the Investment Calculator etc at:
Seahorse_emailbox at yahoo dot co dot uk

Thank you,
SeaHorse

 

[SeaHorse]

How is the resale market for short term flips in both Dubai and other Emirates? If suppose prices start to fall then how does the resell market respond?

 

[OwnerInvest]

Dubai Property Investment

Hi

I have been reading that the fall would not come into place until 2010, according to Morgan and Stanley but I doubt that would affect the rental market much.

The report adds that though the oversupply will hit the market in 2009, it will take until 2010 for the financial effects to be felt.

'In Dubai, the Land Department has recorded a fourfold increase in land prices since 2000. Although this is driven in part by genuine demand, speculative investment has also contributed to the price rises, in our view,' the report continues.

Property prices in the city have registered an average increase of approximately 76% in the past 18 months according to industry figures. In the first six months of 2008 alone, prices shot up by a further 25%.

These rapid increases have attracted speculators to the market, drawn by the staggering gains made by early investors. Most properties have at least doubled in value in the past three years, driven by the critical shortage of units that has seen workers move our into the neighbouring emirates of Sharjah and Ajman.

Any thoughts?

 

[jungli]

The best investment in my opinion would be Abu Dhabi as its never going to be over crowded like Dubai is. As the capital of the UAE, and the richest state, its much more exclusive as the prices are higher. The government of Abu Dhabi don't want to follow in Dubai's footsteps as they have around 90% of the whole of UAE's oil reserves.
Also, they have just introduced 50% capital gains tax for investors who flip in a short period of time. Not sure what the time scale is, but they want people to holdon to their properties. This benefits long term investors hugely!

Hello everyone,

This is my first post on this forum. I'd like to start by thanking people like Roshan for the excellent insights they share with some of the new, hopeful and inexperienced property investors of UAE.

In reply to your post, Asyah, are you sure that Abu Dhabi has already implemented the capital-gains tax? Only the suggestion was delivered in a very recent report and according to RERA of Dubai, there is no intention to place any such pressure on 'flippers' in the near future.

Roshan, I have read some of your posts and you repeatedly state that Abu Dhabi is a flipper's paradise. You also add your concern as to the incredibly high property prices in the emirate. I have friends who have done very, very well by flipping properties in Dubai since the boom first began earlier this decade. I had read in some articles that Abu Dhabi is set to offer investors who missed the boat in Dubai a chance to replicate the success enjoyed by those who entered the Dubai property market many years ago. I'm already riding the roller-coaster of this game and to be frank I'm about to be sick! One report says that the market in Abu Dhabi is very young, very strong and going to be strong until at least 2012. You state that Abu Dhabi is a flippers paradise. There is talk of introducing measures to keep flippers out of the market. Asyah says that Abu Dhabi has already implemented a capital gains tax to weed out the flippers, as suggested by Standard Chartered. What's going on?

From the offset I'll be completely honest because I'm looking for honest, straight-down-to-business advice from those who know better. My investment model is currently riding on the idea of flipping property. The idea was to get into the front doors of the developers in order to secure off-plan property at bulk-discount prices (multiple floor purchases),and then retail individual units at, say, 5% below the developers launch prices. If restrictions are placed on quick re-sales, that would clearly be a nail in the coffin of this investment model.

And for the benefit of my next query, let's assume that the restrictions are put into place. How receptive would developers be to the idea of allowing newly outlawed investors, such as myself, to 'underwrite' on a floor-by-floor basis? As far as my understanding goes, and please do correct me as I am bound to be wrong, underwriting is somewhat different to traditional purchasing. Somebody who underwrites can in theory sell the property on for a profit without charging a 'premium', as such; true? Could something like this not be a loop-hole to the restriction?

I am very new to property investment and would be really appreciative of your advice. My understanding of the way things work is probably inaccurate and I'm here to correct it!


Thanks

 

[Asyah Rajah]

Sorry - My MISTAKE! I was told its already been introduced by quite a good source, only to be told something different yesterday...

They haven't yet introduced it but it's not far off?

 

[Roshan]

I wouldn't say it is "fool proof" but I would say the indications are positive, at least for the foreseeable future. As for the term (invest smartly) I advocate the same by saying use "due diligence".
By due diligence I mean researching the market. Whether you are seeking a studio, one bed, villa or even commercial properties the same rule applies. You need to understand the location.. is it suitable to your type of investment? What will be my view?. For example "sea facing" is not the same as "sea view". What is the current market rate, usually expressed as per/sqft. What is the Cap Rate for similar properties in the same vicinity? Would I be buying at above or below the market rate? What amenities are offered? Are there any further fees such as "service fees" How much will they cost per annum? What is the expected delivery date? and what is the likelihood of delays. What about surrounding projects? have these begun? and will I be affected at a later date with noise pollution? What is the track record of the developer, both past and present? And does the project have nearby transport links, if not will it in the future?

This is a general guide to the due diligence I do personally. It might sound like a lot of research, but in reality it is not.

I can assure you from experience that it does pay in the long run...

I have created a property investment calculator with several modules and guides to investing. If you think it would help, PM me and I will send you a copy.

Stephen,

Can I have a copy of the property investment calculator please. My email is [email protected]

Thanks.

Regards

Roshan

 

[mpat]

I think If flipping (speculators) is stopped , market will come down heavily.

 

[jungli]

I too think that the market will come down heavily. Sales will drop dramatically.

 

[Wannaberich]

Morgan Stanley are saying prices will not rise anymore from this day on but will fall 10% from now till 2010.
As soon as prices rise only 1% on average then we can ignore this ignorant report.

 

[Roshan]

I think If flipping (speculators) is stopped , market will come down heavily.

That time is round the corner. Prepare yourself for distress sales

Regards

Roshan