Dubai/abu dhabi - bubble burst

[investorppty]

I am still new on the property market. However just by checking the different forums on this website and the no. of alerts that used to be received pre-July 08 as compared to now, seems to point towards the UAE marketing not only going slow but going through...maybe a price correction.

So many distress sales..Properties being sold at no commission no agents fee. Properties being sold below market value in some cases.

What is going on the DubaiAbu Dhabi. I mayself have been trying to sell and investment for the past month and no interest.

Plse someone with more experince be able to shed more light.

Thanks

 

[sonofthedesert]

I think the bubble has indeed burst and there are many of us holding properties that we will be forced to finance and rent out (inshallah!). Just take a look in the Gulf News properties section of the newspaper or the Better Homes and Sherwoods websites. There are thousands of unfinished places for sale and NO BUYERS. That means that most have bought with the intention to flip and that is bad news folks. I've never seen anything die out so quickly. but it is what it is. My gut feeling is that there will still be a reasonable demand for finished property in Abu Dhabi in a few years as these places come on the market. Remember, AD has all of the oil and will most likely continue to be a major player in the future, but the current world wide credit crisis/liquidity crunch and stock market meltdown has made it bad for the time being. There is hope, however, that things will stabalize as this market matures and turns into a stable market. There is also the possibility that people that want to buy may get fed up with the developers charging 23-2400/sq ft and look to re-sales.

I thought I'd gotten the deal of a lifetime when I purchased a place for 1700/sq ft at the last AD Cityscape in May. I thought I'd be able to unload it for 2000/sq ft before completion. Nothing yet...nada...no offers. The people that made the money were probably in the know and bought at 1000-1100/sq ft. I've arranged for financing and will try to rent it out when its done, but it is not the scenario that I wanted. If the rental market is bad, then I'm really going to be in trouble as I don't plan on paying a mortgage myself as I already have 2 properties that I rent out in Canada. My AD apt. is an 813 sq ft 1 bed on Reem Island and it looks like I'll have to rent it out for 150000 dirhams/year to break even. Who knows? When its all said and done I have the feeling that it won't be the locals that get screwed in the end.

 

[cheemz]

I think the bubble has indeed burst and there are many of us holding properties that we will be forced to finance and rent out (inshallah!). Just take a look in the Gulf News properties section of the newspaper or the Better Homes and Sherwoods websites. There are thousands of unfinished places for sale and NO BUYERS. That means that most have bought with the intention to flip and that is bad news folks. I've never seen anything die out so quickly. but it is what it is. My gut feeling is that there will still be a reasonable demand for finished property in Abu Dhabi in a few years as these places come on the market. Remember, AD has all of the oil and will most likely continue to be a major player in the future, but the current world wide credit crisis/liquidity crunch and stock market meltdown has made it bad for the time being. There is hope, however, that things will stabalize as this market matures and turns into a stable market. There is also the possibility that people that want to buy may get fed up with the developers charging 23-2400/sq ft and look to re-sales.

I thought I'd gotten the deal of a lifetime when I purchased a place for 1700/sq ft at the last AD Cityscape in May. I thought I'd be able to unload it for 2000/sq ft before completion. Nothing yet...nada...no offers. The people that made the money were probably in the know and bought at 1000-1100/sq ft. I've arranged for financing and will try to rent it out when its done, but it is not the scenario that I wanted. If the rental market is bad, then I'm really going to be in trouble as I don't plan on paying a mortgage myself as I already have 2 properties that I rent out in Canada. My AD apt. is an 813 sq ft 1 bed on Reem Island and it looks like I'll have to rent it out for 150000 dirhams/year to break even. Who knows? When its all said and done I have the feeling that it won't be the locals that get screwed in the end.

Well Said...
Even though your not in the situation that you had intended, I still think you are much better off than many who have handfuls of property they cant sell and cant get mortgages on either!

 

[Saeid]

sonofthedesert
How are the properties in Canada doing? Would you rate them as a good investment?

 

[sonofthedesert]

Very well. I wish now that I'd invested more in Canada than here, although I do think Abu Dhabi is going to be the one that leads this country forward and NOT Dubai. That is fairly obvious now.
I have a few places that I rent out in Halifax. They weren't as expensive to buy as property in other cities initially, but they have gotten good appreciation as a result of the off-shore oil developments in the North Atlantic and subsuquent economic expansion in the city. There is also a constant pool of potential tenants with several major universities and a large naval base/port in the city. With real estate declines starting in some of the 'bubble' cities like Vancouver, Calgary and Toronto, I would also look at these in the next year or so for substantial discounts - but not to the same degree as in some US markets.

 

[raheelm]

Hi

I have one property in JVS, in the lawns, bought at 800 sqft studio apt. any suggestions if i should hold this in current market scenario or sell it off

Any thoughts.

Regards
Khan

 

[sonofthedesert]

First, many of these places in JVS will not be completed. The developers can't afford them any longer. Be very careful. Second, you probably paid too much for it, if you purchased at any time during the last year or so. Third, you have to look at how much you put down for a deposit and stand to lose by walking away against the price of similar places 6 months to a year from now. Most places will depreciate big time. You may still come out ahead by cutting and running and purchasing a significantly discounted place later on. I know many people that are doing that. Persoanlly, I wouldn't bother making any more payments on an off-plan in Dubai right now. I'd wait and get something else. Good luck.

 

[Saeid]

Selling is easier said than done now a days. we're just gonna hang on to what we got and not make any moves. we know we're gonna loose money and we're OK with that.

 

[sonofthedesert]

I'm not talking about selling necessarily. If you have only put down 10-20% and can't sell, walk away and buy something else that is cheaper in six months to a year as prices depreciate. Its called cutting and running. Take your lumps now and buy something cheaper later. You have to decide which is more profitable.
Personally, I think Abu Dhabi is going to be the one to come out of this okay. There is a drastic shortage of housing, they have 90% of the oil and are currently in the process of basically buying out Dubai so it doesn't go completely bust. Look at Tamweel, Amlak merger with fed (AD) real estate bank amd the new real eatate/mortgage compant tied in with Aldar etc. Also, there is talk of many other Dubai inc. companies getting taken over by AD such as Emirates, Dubai Holdings etc.

 

[Saeid]

I heard last night that Burj Dubai was bought from Emmar by Abu Dhabi for, ready for this?


1 DH.
Any one heard of this?
What you're saying makes good sense.

 

[raheelm]

Jvs

First, many of these places in JVS will not be completed. The developers can't afford them any longer. Be very careful. Second, you probably paid too much for it, if you purchased at any time during the last year or so. Third, you have to look at how much you put down for a deposit and stand to lose by walking away against the price of similar places 6 months to a year from now. Most places will depreciate big time. You may still come out ahead by cutting and running and purchasing a significantly discounted place later on. I know many people that are doing that. Persoanlly, I wouldn't bother making any more payments on an off-plan in Dubai right now. I'd wait and get something else. Good luck.

well thanks for the advise. Ihave been checking the market and there are a few projects being sold around the same price. Specially the ones who dont have a bank promoting a loan. The rest are all around 900+

I know the developer as my friend has one from them from the DEC tower, which they are in the process of handing over.

Hope our investments in this stay. Will look for a buyer and sell if can else will hold on as the developers are not asking any more payments as of now.

 

[psychiatrist]

That is the worst advice, to cut and run. If people did that you would cause another banking crisis, and you can kiss buying back at a later stage goodbye, there will be no later stage.
Developers will default on the short term loans and will bo bankrupt!!!!
My advice is if you can afford make the payments like you agreed to do .
Selling at a loss is not easy and if everyone does it at once Dubai will sink
Better to ride this thing out, already they are signs that the whole emirates will pull together and they understand that they are all connected, the notion that they will let Dubai sink, and focus on AbuDhabi, is just a fairy tale.
After that get to know other investors who bought in the same project that you did, if all of you are a group, you can have better bargaining power to the investor which can lead to structured payments according to consturction, revised payment schedules.
Be in this for the long term and there is plenty of money to be made. Cutting and running and then reinvesting is just crazy, I would rather hide money under my bed

 

[sonofthedesert]

That is the worst advice, to cut and run. If people did that you would cause another banking crisis, and you can kiss buying back at a later stage goodbye, there will be no later stage.
Developers will default on the short term loans and will bo bankrupt!!!!
My advice is if you can afford make the payments like you agreed to do .
Selling at a loss is not easy and if everyone does it at once Dubai will sink
Better to ride this thing out, already they are signs that the whole emirates will pull together and they understand that they are all connected, the notion that they will let Dubai sink, and focus on AbuDhabi, is just a fairy tale.
After that get to know other investors who bought in the same project that you did, if all of you are a group, you can have better bargaining power to the investor which can lead to structured payments according to consturction, revised payment schedules.
Be in this for the long term and there is plenty of money to be made. Cutting and running and then reinvesting is just crazy, I would rather hide money under my bed

I disagree. If you have only put down 10% and still are expected to make payments on something of which the value will depreciate by anywhere up to 40%, then why would you do so? I suppose it is is your money and you are free to burn it if that is what you like, but that makes absolutely no sense. Stuff that is 2000/sq ft, for example, should be 1200 in the near future and WILL go to those prices. Moreover, Dubai Inc is not going to collapse completely. All people will do is flush out the weaker developers and force the others to lower the prices to reasonble levels. The fact of the matter is - there are going to be massive distressed sales and discounts in the next few months to a year and if you are an and user that is planning to actually live in the place (of which there are few these days) then why wouldn't you look into completed properties at a substantial discount. I have no loyalty to the greedy developers or the people that over-extended themselves trying to flip this crap. You end up buying something considerably cheaper than sticking with your overpriced off-plan.
My other point was NOT that this person should buy something in AD. I was merely stating a general fact that it appears as though Dubai and AD are very different markets and that AD may be the better investment in the longer term of the two, due to the fact that it has all of the oil and, therefore , the money. This is what business is centered on in the Gulf - not being a wanabee Singapore or Hong Kong. It is also not leveraged to the hilt and is not going to have to rely on all the Disney garbage they are trying to sell people on in Dubai. I don't want to get into a Dubai bashing rant as there has been plenty of that recently. One does have to look at the reality and that is that Dubai could very well collapse without Abu Dhabi in the near future and Abu Dhabi will probably own a major stake in much of Dubai for the years to come.

 

[TommyC]

There is a very active forum regarding property here: Dubai property

My suggestion now would be to stay out of the market, if you already have bought, it might be worth considering to stop losses as a lot of projects are facing an uncertaing future. Whatever have been in the past is not in the future. Considering the current prices, you might just as well hold on to your money a bit longer and consider buying something in the more well-established markets where prices are dropping, Europe or USA.

You make up your mind, watch out for the "sales-talk" along the way! There's always someone that wants out and wants to sell you something because the future is SO bright, or an agent trying to.... Well, be careful! Better wait and see what happens.

 

[Ajmanprop]

Just a general statement - mainly for new buyers.

I see a lot of posts saying that it is Speculators that have caused the fall of the market. Sitting overseas, your guess is as good as mine but to an extent, speculators create buzz, they bring liquidity and so on....

What has been a big letdown is that the Regulators - who should be the guardian of the market- are woefully absent....and they haven't said or done anything that would increase the confidence of a single investor by an iota. Investors have always felt that in your market - developer's have the upper hand - events, pronouncements, re-written rules of recent weeks have simply worked to strengthen that. Visit the regulators website, and there are ads for developers. Imagine going to the Fed Reserve website and seeing individual Bank and brokerage ads.

China has done a far better job - having had no concept of individual property, capital markets etc... in a short time.

I myself have invested in Ajman... it has gotten to the point where in good conscience, I cannot even bring myself to resell my off plan property - unless it is to someone who knows what they are doing. Probably can act on my conscience - since there are no buyers anyway.

1) My contract says that if the developer delays contracted delivery by 2 years... I am entitled to a full refund.
2) It also says, that I can trigger a buyer default - and get a refund less 30% admin fees.

My point is - with the absence of a regulator, or a delinquent one... I have no faith that any developer can withstand the equivalent of a "run on the bank".... in either of the two scenarios.

As a result, that's exactly what I am planning to do. Forfeit an AED 400,000 paper gain, and forfeit 30% of the amounts already paid. Better to cut my losses since there is absolutely no one watching the developer. Those holding on, are betting on the developer doing on the right thing, and to manage smartly the vast sums that they've already collected in pre-sales. These developers are the same guys, who advertised milestone payments, and presented a contract very late...that was calendar based. I am lucky to have had a refund clause!

I would hold onto it if the rules / oversight regime was transparent. 3M+ sq feet and for 9+ months the developer's have shifted sand around....with complete impunity.

Also, for those who think - that the jurisdictions reputation is at stake, and they could not leave ghost towns lying around etc... maybe so. However, that's exactly what people said about Iceland, Russia in the 90's and so on. For instance, a DXB developer announced a $20B project in Libya...whose '06 GDP was $46B. Have 3 projects like that in various states of disarray in Libya ...and what can anyone do. Any savior, would redictate terms - take it or leave it.

OK in the UAE's case, everyone can look to AD for help but they'll pick and choose and extract heavy concessions.

No country will go out of business.... but for anyone looking to invest, be very careful what you buy, price... and if you have to make a mistake, buy something that is already there - at least you can live in it. If you wait, maybe the regulations will get realigned with realty...and bring some confidence back.

As an aside - I feel like I am caught up in an episode of the "Twilight Zone"....since post dated cheques keep forcing me to pay for a project that has Zero construction. Can't wake up from a bad dream. Just to put a stop on the cheques, I need to engage lawyers etc... not a trivial stuff/expenses.

Thanks for hearing me out...good luck.

 

[Saeid]

It is a shame how rules get re-written here without any consequences for the developers. We had two flats handed over to us about a year ago. i went to apply for a visa on one of them and I was told that they don't give visas on flats any more. Just like that! The developer was the government of Ajman, not a private developer. Imagine when the government doesn't honor its own contract, what can you expect from private developers?

This whole place has a 'take the money and run' attitude. That's why I'm so relieved to see this correction/crash in the market. This will be teach us, the investors not to rush into busy sales offices and just buy anything that's offered to us without question, and the developers to respect the buyers a little more and be accountable for the contract they sign.

the market will change in a few years, after a little or a lot of correction. Once that happens, we will off load our properrties and invest else where. I think a lot of people will do the same.

 

[Ajmanprop]

The unfortunate part is when people that can least afford it get caught up partly in the euphoria, and rationalize it with blind faith that if the Govt allows these guys to operate, surely they must be legitimate.

A individual on another forum - says that his payments so far (~40% of total) is the result of 13+ years of savings in the Gulf. As he puts it that itself is the result of "half stomach" (I assume skipped meals),apart from keeping the family overseas to save money.

He visits the site weekly, for 7 months and no progress. He asked the developer for a months extension on one of the payments, and they wanted 1000 AED+. Zero progress at the site.

The individual is really distressed... and cannot fathom forfeiting 30% of payments to date and walking away....(personally I think that's where he's making the mistake).

To add to his woes, he bought from a broker - who marked up the property by 95,000 AED... but his contract doesn't show any prior resellers.

There's an individual who has blind faith in the system..... but will probably be written off as a speculator...and become roadkill. While there is not doubt, that the prospect of gains clouded his judgement - but I suspect all he wanted to do was buy property, see it built, get a visa and bring his family.

 

[Saeid]

Very sad indeed!
Saeid

 

[psychiatrist]

They are somethings the government can do to restore confidence in the market.
1) Stop the nonsense of reviewing the residence visa, it was offered as a selling point, why is it changing
2) Discourage developers from launching new off plan projects. Believe it or not some are still launching projects to this day.
3) They should regulate and give and control the supply through regulation (ie) there should be a waiting list, planning permission ect...
4) They should shore up banks who should be willing to lend again
5) Banks should start credit rating, that way they can lower the LTV ratios
6) They should seriously consider the GCC currency and start talking again about it, just the talk alone of this was the result of the hedge funds pouring billions of dollars into the emirates in the first place.
I am confident that in 1 years time after the dust settles the price of oil will go up and thats why Dubai, will not be a Singapore or Hong Kong for that reason.
Abu Dhabi must realise that its sucess also hinges on the sucess of Dubai. If Dubai tanks so does the rest of the emirates.
Last but not least developers should take advantage of the lower commodity prices of steel, cement, buy in bulk and begin constructing, if they wait for better times, those will not come.
We investors want to see results at the end of the day

 

[albog]

7) Stop this luxury bullcrap and concentrate on affordable housing.