Dubai property prices to fall 10%

[dubister]

I am a new 'investor to be' in Dubai, but this news is confusing me now. Any thoughts? Thanks

Today's Gulfnews Article..

Dubai property prices to fall 10%

By Suzanne Fenton, Staff Reporter
Published: August 05, 2008, 23:23

Dubai: Property prices in Dubai are likely to fall 10 per cent by 2010 as supply outpaces demand, but they are expected to rise in Abu Dhabi's undersupplied market, Morgan Stanley said in its latest report on Tuesday.

"For 2009, we expect prices to start coming under pressure as oversupply becomes evident [in Dubai]. We forecast a 10 per cent decline between 2008 and 2010 in our base case," said the report.

A sharp correction in Dubai's real estate sector could have a ripple effect on neighbouring countries in the Middle East, with shares of 12 regional property firms dropping an average of 35 per cent, said Morgan Stanley in a report.

"While we expect these price declines to be limited to Dubai, given the level of undersupply in surrounding markets, we cannot rule out a 'contagion' effect on the Middle East, North Africa property shares prices, as investor confidence suffers," said Morgan Stanley.

Morgan Stanley analyst Mai Attia says growth in the Menas property market will be driven mainly by Abu Dhabi and Qatar due to the undersupply of housing.

At the other extreme, oversupply is expected to hit Dubai in 2009, leading to a period of price declines, Morgan Stanley said.

However, an analyst at a leading real estate services firm, disagreed.

"No, I don't think so. You have to take into account the population growth coming. Over 40,000 units are required each year to keep up with this, in addition to the pent-up demand from those people living in Sharjah and Ajman.

"If anything, all those people living in other emirates will start coming back into Dubai.

"They [prices] are going to go higher," the analyst said, requesting anonymity.

While property prices in Dubai are predicted to drop 10 per cent by 2010, it is in Ajman that some believe will see the greatest price corrections, due to the Dh1.4 billion of infrastructure currently under construction.

The knock-on effect could be house prices going through the roof.

Less than two weeks ago, Standard Chartered had targeted "excessive" speculation as the main cause behind the rising prices. They suggested a possible remedy would be the introduction of a 50 per cent capital gains tax on properties bought and sold within 12 months.

Standard Chartered showed a premium of Dh1,950 per square feet for villas and for apartments, the price increases around Dh70 per square feet the higher the floor.

Property prices have continued increasing to the disbelief of many investors. Colliers International recently reported that prices in Dubai rocketed 42 per cent in the space of three months, between the last quarter of 2007 and the first quarter of 2008.

An overall increase of 78 per cent was recorded in a single year, between first quarter of 2007 and first quarter of 2008.

Billy Rautenbach, director of operations at Better Homes, predicts property prices in Dubai will balance out over the next couple of years.

"Certain properties will continue to increase in value and certain properties will decrease in value. The market is stabilising but we still see some areas growing month on month especially in the villa market," Rautenbach said.

Matthew Green, research manager at Cluttons UAE, says prices will not slump. Dubai's seemingly unshakeable popularity among expatriates is winning the battle over inflation fears.

 

[NwAli]

Well i really dont think so its going to go down, i just summer and the market has always being slow, so people speculate , these are the same people who said Dubai market is going to Crash in 2006 ?? on an average there are 800 people who arrive in dubai and looks for rental and property, i see prices being stable in the future if not to increase.

 

[DubaiDMC]

Well i really dont think so its going to go down, i just summer and the market has always being slow, so people speculate , these are the same people who said Dubai market is going to Crash in 2006 ?? on an average there are 800 people who arrive in dubai and looks for rental and property, i see prices being stable in the future if not to increase.

very well said.

 

[rudeboy]

ppl have been saying that for the past few years and the market hasnt come down.

 

[Stephendxb]

A "correction" will come and those who have speculated without due diligence will be the first to suffer. Put simply, those who have bought with their eyes closed will find it hard to suddenly sell a property at any sort of premium if the location and developer are below par. In my opinion this will be more apparent in the latter half of 2010. However, if a capital gains tax is introduced on re-sales within the 12 month period then you well may see signs of distressed sales sooner.

If you have a reasonable understanding of the property market you are dealing in then you should do fine in the long term. At least do the due diligence before buying.

Good property investors make money regardless of market conditions...is how you invest that counts.

Just taking time to read through the different subjects in this forum will certainly help..good luck.

very well said.

 

[georgihh]

Until all the old buildings and villas are demolished the supply want be enough.
They build but also demolish.
Prices will go up at least another 50% (average) before become stable.
If the business goes down which is about to happen than you don’t know but nothing to do with the supply.
Next year too many offices and shops will be empty and we don’t know which way is going to go. But residential units will enjoy price increase for some time

 

[NwAli]

Definately there will be a correction, but i doubt the prices will go down, invest wisely and you will make money, the price will stabel area wise now its like some developer charges you 1200 per sq.ft and the next plot beside it will be selling 2000 per sq.ft. well same speculation were going on when they launched plam jebel Ali they sold at 2.8m now what is the premium if not mistaken its 220% and they haven't even paid the full amount, ... ((2006 market Crash???))..

Dubai has got enough money to finish they projects NOW they dont need our money to build n start a project they will complete n if worst to worst case i dont ppl will make money in the long run when the project is compelete.

i see prices being more stable and developer charging a base prise area wise cuz most of the small time developer have left the market, n beleive Emaar has a hand in making the market ppl worried they are charging insane amount now for their property's , let erey one make money filler to investor to end user's .. if they qoute prices 1 years prices definatly ppl will get worried Emaar warsan they sold @ 2300 per sqft cud get furjan or water villa's veneto @ 1700 max i beleive , n Maysan launch.. they have just lost it.. if there few launches goes flop they will come to thier sense's..... anyways in the past who had invested had gain, i hope the future to be good as well , invest smart & no gain with pain & rsik

 

[rajatsahi]

There won't be a low price as far as in The Palm Jumeira. For example a 3 bed apartment
in The Palm Oceana was around 5 Million AED earlier. Now it is selling around 5.5 to 5.6 Million AED. There is an increase in price in The Palm Dubai.

 

[dubister]

A "correction" will come and those who have speculated without due diligence will be the first to suffer. Put simply, those who have bought with their eyes closed will find it hard to suddenly sell a property at any sort of premium if the location and developer are below par. In my opinion this will be more apparent in the latter half of 2010. However, if a capital gains tax is introduced on re-sales within the 12 month period then you well may see signs of distressed sales sooner.

If you have a reasonable understanding of the property market you are dealing in then you should do fine in the long term. At least do the due diligence before buying.

Good property investors make money regardless of market conditions...is how you invest that counts.

Just taking time to read through the different subjects in this forum will certainly help..good luck.

Thanks for the inputs. But honestly speaking, what due dillegence is there to do in dubai. For an average "non-connected" investor there is not much research you can do other than seeing what other people are buying. And that is pretty much buying with the eyes closed.

What is your recommendation for educated investment, is it the 3k-5k per sq ft palm and other super hot properties or is it the 600-900 per sqft ajman, uaq and rak properties...

I am very new to the market and have been considering buying Badrah for obvious reasons like Nakheel, Waterfront, Quality and Location. Nothing else...

What else is there that make sense? What about the EMAAR UAQ marina?

 

[nabeelc]

location and quality of badrah are crap.

 

[kashh]

Just ignore..because market is the same just slow at the moment

 

[sasherwani]

Location is nice for Badrah but the quality will be highly substandard. Its a nice flipping property thats all.

 

[rtinvestments]

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.

 

[sasherwani]

A lot of local news editors are again predicting a crash in the UAE market by 2010. They are at their dirty work again. Five reasons why they are wrong – again! Remember they predicted a crash even last year and the market jumped 60% in the 6 months following their prediction.



Reason # 1 – At least 100,000 Dubai residents will need new accommodation by 2010.



Source: 100,000 Dubai residents face eviction - Real Estate - ArabianBusiness.com



Reason # 2 – UAE has the highest population growth rate in the world!



Source: Khaleej Times Online - UAE has highest population growth



Reason # 3 – Metro, Universal Studios, Bawadi, Freej, Atlantis, Dubai Mall, Burj Dubai, Six Flags will “increase” demand for apartments. Or will people have their vacations in Bahrain?



Reason # 4 – All Dubai Projects are delayed! Whether it’s DAMAC, FARA’A, EMAAR, NAKHEEL (Nakheel is the champion of delayed deliveries!),DUBAI PROPERTIES, SAMA you name it!

Reason # 5 - New jobs will be created when Silicon Oasis, Academic city, Motor city, Dubailand, Healthcare city etc etc etc will finish. New jobs means more people coming in!

Let them predict and let us keep investing!



One very interesting observation I have is that most of the people speculating a crash are non-finance non-real esatate sector employees or are new to the industry. They read a few negative articles (-ve articles get a lot more publicity than positive ones) and panic while smart investors make money. Morgan Stanely has been predicting a crash in UAE, Qatar and India for 4 years now. The moment the crash actually happens they will say, we predicted this 250 years ago. If they are so right, how could they miss the US real estate crash?



Just remember to invest smartly – stick to good developers!

 

[dubister]

A lot of local news editors are again predicting a crash in the UAE market by 2010. They are at their dirty work again. Five reasons why they are wrong – again! Remember they predicted a crash even last year and the market jumped 60% in the 6 months following their prediction.



Reason # 1 – At least 100,000 Dubai residents will need new accommodation by 2010.







Reason # 2 – UAE has the highest population growth rate in the world!



Source:



Reason # 3 – Metro, Universal Studios, Bawadi, Freej, Atlantis, Dubai Mall, Burj Dubai, Six Flags will “increase” demand for apartments. Or will people have their vacations in Bahrain?



Reason # 4 – All Dubai Projects are delayed! Whether it’s DAMAC, FARA’A, EMAAR, NAKHEEL (Nakheel is the champion of delayed deliveries!),DUBAI PROPERTIES, SAMA you name it!

Reason # 5 - New jobs will be created when Silicon Oasis, Academic city, Motor city, Dubailand, Healthcare city etc etc etc will finish. New jobs means more people coming in!

Let them predict and let us keep investing!



One very interesting observation I have is that most of the people speculating a crash are non-finance non-real esatate sector employees or are new to the industry. They read a few negative articles (-ve articles get a lot more publicity than positive ones) and panic while smart investors make money. Morgan Stanely has been predicting a crash in UAE, Qatar and India for 4 years now. The moment the crash actually happens they will say, we predicted this 250 years ago. If they are so right, how could they miss the US real estate crash?



Just remember to invest smartly – stick to good developers!

I agree with you a %100 in your logic, that Dubai's direction is fool proof.

But what concerns me the most is like when you say "invest smartly". One can only invest smartly, if he/she doest not reach beyond thier means... and honestly speaking the prices are way to high in certain places which are slowing or stopping entry of new investors, many of whom are suitable end users... this is definately not healhty for the market.

I for one am looking to enter the investment market, but things are so out of range that I have started looking into villas. Atleast I can justify cost plus nature of villas...

 

[rudeboy]

I agree with you a %100 in your logic, that Dubai's direction is fool proof.

But what concerns me the most is like when you say "invest smartly". One can only invest smartly, if he/she doest not reach beyond thier means... and honestly speaking the prices are way to high in certain places which are slowing or stopping entry of new investors, many of whom are suitable end users... this is definately not healhty for the market.

I for one am looking to enter the investment market, but things are so out of range that I have started looking into villas. Atleast I can justify cost plus nature of villas...

if you want something cheap then dubai aint the place for you. Mind you the cheapest areas in Dubai right now are JVS, International City, Silicone Oasis and Sports City but as we all know their prices will go up too.

In Abu dhabi Hydra Village is cheap i want to get rid of my 3 bedroom villa which I have found out is going for 1.6 mill dhs which I think is cheap compared to Current Emaars Prices.

If you want somthing really cheap go to Ajman but no escrow there.

 

[Stephendxb]

Due Diligence

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.

I agree with you a %100 in your logic, that Dubai's direction is fool proof.

But what concerns me the most is like when you say "invest smartly". One can only invest smartly, if he/she doest not reach beyond thier means... and honestly speaking the prices are way to high in certain places which are slowing or stopping entry of new investors, many of whom are suitable end users... this is definately not healhty for the market.

I for one am looking to enter the investment market, but things are so out of range that I have started looking into villas. Atleast I can justify cost plus nature of villas...

 

[Roshan]

A "correction" will come and those who have speculated without due diligence will be the first to suffer. Put simply, those who have bought with their eyes closed will find it hard to suddenly sell a property at any sort of premium if the location and developer are below par. In my opinion this will be more apparent in the latter half of 2010. However, if a capital gains tax is introduced on re-sales within the 12 month period then you well may see signs of distressed sales sooner.

If you have a reasonable understanding of the property market you are dealing in then you should do fine in the long term. At least do the due diligence before buying.

Good property investors make money regardless of market conditions...is how you invest that counts.

Just taking time to read through the different subjects in this forum will certainly help..good luck.

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

 

[rudeboy]

roshan can u plz contact me on [email protected] or can you please let me know your email id. thanks

 

[Wannaberich]

I don't think you can make too much of any one report,a group of reports put together if saying the same thing should be noted.However,its so difficult for anyone to predict what will happen.Especially in the case of Dubai which is not a mature market.
Personally I can see prices slowing right down around 2010 when there should be alot more supply.
Its is very difficult to know how many projects will be completed in the next two years however.Most buildings have long delays in start up and completion.Some are being abandoned as developers are finding construction costs too high.
I watched a You Tube video someone just took of JV and believe me that area is still mostly desert with little construction going on.
Also,we are told 800 people per week are moving to Dubai.Where did this figure come from and how many of these are construction workers and other low paid workers.Who knows.
I do think long term Dubai is still a great investment if you are looking to buy now.
I think there will be alot more people moving to Dubai from 3/4 years on when most of the metro is done plus alot more projects/entertainment venues are built.I think many people are waiting for that.Also by then alot of Bbay will be built so alot more office workers will be arriving.Then in say 7-10 years when a great deal is finished,Dubai will a great attraction for even more people to move to.