Go figure where the property prices are heading

[Fran]

Yesterday a property consultant from TAMEER called and offered special pre-Cityscape price for Tameer Towers, Al Reem island in Abu Dhabi. According the company sources prices at Cityscape and onwards will be above AED 2900 per sq.ft.

Today Zawya reports that property prices in Dubai are to fall, citing the Gulf News.

Last week the fiasco of Lehman brothers was examined by the world media and the local press reached the conclusion that actually it will have a positive effect in long term on the Gulf markets.

UAE Central Bank assured the public in a statement that there is no systemic risk, while MEED says that local firms may face difficulties in securing finance as failure of Lehman Brothers drives up cost of dollar debt. This is not bad at all, as less construction means balance between supply and demand , which leeds to stable, if not higher prices.

Since 2002 property investors, real estate professionals and market analysts are toying with the “burst of the bubble” and the “price correction”, but so far the corrections are materializing only in one direction.

Go figure where the property prices are heading : Dubai Chronicle

 

[georgihh]

Yesterday a property consultant from TAMEER called and offered special pre-Cityscape price for Tameer Towers, Al Reem island in Abu Dhabi. According the company sources prices at Cityscape and onwards will be above AED 2900 per sq.ft.

Today Zawya reports that property prices in Dubai are to fall, citing the Gulf News.

Last week the fiasco of Lehman brothers was examined by the world media and the local press reached the conclusion that actually it will have a positive effect in long term on the Gulf markets.

UAE Central Bank assured the public in a statement that there is no systemic risk, while MEED says that local firms may face difficulties in securing finance as failure of Lehman Brothers drives up cost of dollar debt. This is not bad at all, as less construction means balance between supply and demand , which leeds to stable, if not higher prices.

Since 2002 property investors, real estate professionals and market analysts are toying with the “burst of the bubble” and the “price correction”, but so far the corrections are materializing only in one direction.

Go figure where the property prices are heading : Dubai Chronicle

House prices will hit their peaks in the first half of next year due to the massive 70,000 units expected to be released on to the market in 2009, according to a recent report by EFG-Hermes.

I want to know where are the 70000 units being released next year

 

[docc]

70,000 units? 70 thousand units? Seventy bloody thousand units?

I don't understand where these numbers come from. 70,000 units would translate to roughly 350-400 buildings. Does anyone here see 350-400 buildings being handed over in 2009? I would like to meet with the reporter and ask him/her to show me how he/she managed to deduce this.

I can see units being delivered in IC, DG, JLT, few in Marina and some here and there. Adding all these together will still be less than 15% of what has been quoted in the article. Back to journalism school i guess.....edit...i hope!

 

[Investoman_uae]

I agree its been exagerated abit. I dont see that amount being handed over in 2009. However, I still believe there will be an over supply. Most of the buyers are speculators, there arent enough end-users in the market.

Alot of buyers buy whole floors too,... so imagine if the price of a one bed is goin for 1.5 M ..to get an 8% return, you should look at 120,000 per annum.... I dont know if there are many people who would be prepared to pay that much... and for so many 1 bed units which will hit the market in the next few years.

The only people who can afford that are well paid european expats, and how many of those exist in the market? I am guessin about 80% of the population earn below 10k a month? Maybe more than 80%.... and cost of living is rising... so that 10K will come down by quite alot.

I dunno anyway, I get a headache tryin to figure out how people will fill these apartments. Then again, who am i to give this analysis, i bought an apartment in Al Reem Island for 2M.... I know its meant to be super luxury... but then again so are all Al Reem Island units. Who will fill all those 1.5-2M 1 bed units.

Maybe by completion in 2010/2011... people can afford to live in them. MAYBE!!

Inv.

 

[Fran]

...with the recent and future crackdown on the sharing accommodations, people will have no choice, but to rent smaller units such as studios and 1BR.
All well planned way ahead.....

 

[docc]

The UAE is spending hundreds of billions in various projects. Our investments are but a drop in the ocean compared to the investments the Sheikhs are making. Do you think they haven't considered all these things before announcing projects? They probably have a 100 analysts working every single day trying to figure out what to do when.

In my opinion, we are far from a crash and when i say far, i actually mean far. With an annual growth of 7% meaning almost a 100,000 people moving into the country every single day, you can imagine how many housing units will be required. Companies are being set up every single day which tells you how much demand there is for office space.

Regulations are being put into place to prevent the rapid increase in prices and not to cut down supply. Yes, a few projects are being slowed down but this is mainly due to the infrastructure shortage. Heck, there are some buildings that have been completed but haven't received power and water connections yet. These are the REAL reasons for the slow down and NOT the lack of demand.

This is only the beginning of what is to come. Oil prices are going to go through the roof in the next few years and i'm talking the likes the of $200-300 a barrel. You'd be surprised but there WILL be a day when oil prices will be $500 a barrel. We can discuss this again in a decade so that i can say "I told you so" . Sitting on so much oil money, one can imagine what else is yet to come. A lot of construction companies in the US are now considering shifting their focus to the Gulf simply because they don't have enough business back home especially now thanks to their economy practically on the verge of a collapse. Banking is a booming sector in the Middle-East and you can expect a lot of laid of bankers wanting to move here. Just imagine how many industries will follow with foreign economies slowing down and crashing! Think for yourself and do enough research; don't especially believe everything you hear and read!

As for now, just make smart investments. Don't go spending 5 Million AED on a Studio or a 1 BR. You're the only one to blame in such a situation. You'd be surprised how EASY it is to make money here....just invest smartly

Good luck.

 

[georgihh]

...with the recent and future crackdown on the sharing accommodations, people will have no choice, but to rent smaller units such as studios and 1BR.
All well planned way ahead.....

Yes well planned but is it going to work?
Higher salary means higher prices from the companies and the inflation will hit the roof.
The problem will come when the construction slows down and not many people are needed. Less people less occupancies, but by that time too many buildings are going to be built and they might be empty.
The tourism which supposes to make Dubai the destination number one is on the way to collapse. Not many people are willing to travel because of the ridicules prices.
UAE needs new business for the people to come and occupy all the new buildings.
DIFM is a way out but for the time being, but not much is happening out there.
One way to postpone the above is to delay the existing projects – but more and more people are already frustrated of all the delays and cancellations and the image of the properties business in UAE is going down and will come the time when all those investors will find a new places to invest their money.
New business is needed very urgently.
On top of that when the prices around the world are going down here - going up
If you are investor from UK for example - you will by cheaper in your country, don’t you think so?
We will find out very soon how sustainable is the property business in Dubai in the next couple of months.
I know too many ways to get out of this but we will see if the government is willing to do so.

 

[Fran]

The UAE is spending hundreds of billions in various projects. Our investments are but a drop in the ocean compared to the investments the Sheikhs are making. Do you think they haven't considered all these things before announcing projects? They probably have a 100 analysts working every single day trying to figure out what to do when.

In my opinion, we are far from a crash and when i say far, i actually mean far. With an annual growth of 7% meaning almost a 100,000 people moving into the country every single day, you can imagine how many housing units will be required. Companies are being set up every single day which tells you how much demand there is for office space.

Regulations are being put into place to prevent the rapid increase in prices and not to cut down supply. Yes, a few projects are being slowed down but this is mainly due to the infrastructure shortage. Heck, there are some buildings that have been completed but haven't received power and water connections yet. These are the REAL reasons for the slow down and NOT the lack of demand.

This is only the beginning of what is to come. Oil prices are going to go through the roof in the next few years and i'm talking the likes the of $200-300 a barrel. You'd be surprised but there WILL be a day when oil prices will be $500 a barrel. We can discuss this again in a decade so that i can say "I told you so" . Sitting on so much oil money, one can imagine what else is yet to come. A lot of construction companies in the US are now considering shifting their focus to the Gulf simply because they don't have enough business back home especially now thanks to their economy practically on the verge of a collapse. Banking is a booming sector in the Middle-East and you can expect a lot of laid of bankers wanting to move here. Just imagine how many industries will follow with foreign economies slowing down and crashing! Think for yourself and do enough research; don't especially believe everything you hear and read!

As for now, just make smart investments. Don't go spending 5 Million AED on a Studio or a 1 BR. You're the only one to blame in such a situation. You'd be surprised how EASY it is to make money here....just invest smartly

Good luck.

Quick facts:

• GDP growth 5.2% this year
• Oil only yesterday jumped by $16 and now is $120.92 per barell.
• Real estate stocks rebounded on the DFM

If any big shark (large corporate) is looking for commercial space, please let me know

 

[Flyerman]

Very interesting discussion, I am surprised its not easier to work out what the supply of units will be for next year. Does anyone have a more accurate guesstimate?

My view is that there has been so much investment from investors, the rental supply will be substantial for some time. It should be just a question of what is the demand, and this is where things are getting harder to predict.

There are few doubts business activity is very high in UAE, and this is drawing in newcomers. Indeed, the business slow down / recession elsewhere will make more people look at UAE as a place to work and live. However, my main issue are the salaries paid and the number of people who can afford the rent of expensive properties. Ultimately goods and services from the region must be priced competitively, and salaries are regulated by these market constraints.

Overall there may be a slightly unrealistic expectation as to what level of rental tenants will be able to pay in the future. There will be a limit on the umber of highly paid expat bankers.. or maybe not.

As for oil price going up, I think it will go down to $70. We have seen that demand of oil is not inelastic and consumption drops with prices rises. Take out some speculation, a probable supply increase and price could end up lower than $70. Prices above $20 make it profitable to extract now and there's plenty still down there.

I dont think UAE is immune from the forces of supply and demand and for example, I think certainly when it comes to tourism, other places offer lower prices for similar thing.

A price correction downwards in light of recent events would seem to be a logical conclusion as I expect rate of new apartment sales to slow and therefore new prices to adjust with this lower demand.

However, Dubai often surprises.

 

[Investoman_uae]

Is thats a Leeds number? Hey am from Leeds.... but living in UAE.... is your company set up here or back there?

Inv.

 

[Fran]

OPEC cuts production : Dubai Chronicle

UAE Central Banks avails Dhs.50 billion for local banks : Dubai Chronicle

 

[Wannaberich]

We all like to think prices will continue to shoot up but we need to be realistic.
Dubai will be affected by th credit crunch you have to think,but by how much?
Europeans just don;t have the money now to invest in Dubai,on the other hand,investing in property in the UK is a no-no so if they do have any spare money,then investing in Dubai makes more sense.
Same can be said of the americans although they haven't been a big investor in Dubai,although more for big projects like theme parks,etc which may be affected.
As for oil prices,Gulf News reports that high oil prices will shield the UAE from some of the credit crunch which is good news.
Regards 70.000 units coming into the market,how the hell can anyone know!?Delays etc make any estimate just a pure guess.However,personally I can't see how prices can shoot up 50-70% per year as they have been doing.A slowdown to around 15-20% seems more likely for next year followed by even less.No more quick bucks with flipping.
At the end of the day no-one knows what will happen.Most people did not see the credit crunch coming,the turmoil in Wall Steet,oil prices up to 147 then back down to 92,sterling dropping rapidly against the dollar etc.
Who know what tommorow will bring.
What really interestes me is who will buy into the many launches due at Waterfront and Arabian Canal due out over the next few years?By then the market would have levelled,
even dropped,making these areas a no-no for investors.
Dubai for me is now a place for long term investment.In 8-10 years when much is completed,it will be an amazing place where many will want to live.