This is the subject of a very interesting thread which was recently posted on the www.propertyforum.com website forum, simply put “I WOULD LIKE TO KNOW HOW MANY ON THIS FORUM WILL INVEST AGAIN IN DUBAI IN THE FUTURE“. The subject has prompted a number of views and opinions which give a very clear indication of the pros and cons of investing in Dubai.
At the time of writing this article the poll currently stands at 75% (18 votes) in the NO camp and 25% (6 votes) in the YES camp which offers a snapshot of the level of investor confidence in the region at this moment in time. A number of arguments have been brought to the table for and against further investments in Dubai and we hereby list a number of the more prominent arguments below.
Those who voted YES
Reduction in Dubai property market prices
Of those who voted yes, one of the main elements seems to have been the reduction in property prices of late from what many had thought to be too high prior to the economic slowdown. The effective bursting of the Dubai bubble seems to have caught the attention of value investors around the world many of which may have been involved in the market in the very early stages. The growing number of distressed price property sales has led to substantial falls as both investors and developers are looking to liquidate their assets. While many see this as an opportunity for the future some are not so sure now that the Dubai property market bubble has “popped”.
Strategic location of Dubai
While the property market of Dubai has taken all of the headlines many people seem to forget that we have seen a massive increase in interest from the international business community with more and more branches and vital offices opening up in the region. In many ways Dubai is the gateway between East and West and many companies around the world are very keen to make use of this very important strategic location. Even though we have seen a reduction in the short term number of international business entrants to the region many believe this is only a short-term blip in a long-term up curve.
Investor rights
While the RERA has come in for much criticism from investors, the government and developers there is no doubt that until recently they have offered very little assistance to property investors. However, many people believe this is down to the very sharp increase in property investment activity in the region which took many by surprise and left the regulatory framework looking very weak. Of late we have seen a number of initiatives from the RERA in favour of both domestic and international property investors, taking away much of the power from developers who had been accused of abusing this position in the past.
Greater choice of completed properties
As the Dubai property market continues to develop there are still many off plan projects on the go although these have attracted more than their fair share of criticism and controversy. However, many people are now happy to acquire completed properties in the region with rents as high as 15% per annum in some areas. The acquisition of completed properties together with completed paperwork would appear to give some property investors the confidence they need to go back into the market. As we mentioned above, the growing strength of the RERA and greater protection for investors would also appear to be part of the positive attitude some have taken.
Investment in infrastructure
The massive investment in infrastructure in Dubai is something which has attracted the attention of both businesses and property investors from around the world. The area has some of the best facilities, best services and a transport network which appears to be growing by the month. This has taken massive investment, literary billions of dollars, in a very short space of time thereby demonstrating that the local authorities are determined to make a success of the region and attract millions of overseas visitors, workers and businesses.
Those who voted NO
Visas
Initially the authorities in Dubai were very easy and accommodating with regards to international visitors, paperwork and visas. However, as the influx of overseas visitors continued to rise there were concerns that local communities were suffering and employment positions were being filled by more and more international visitors. Many on the thread have mentioned the regular occurrence whereby visa regulations and paperwork requirements have virtually been changed overnight. In many circumstances this has caused serious confusion within the marketplace prompting many overseas property investors to reconsider their positions.
Service charges
Developers in the Dubai property market do not have a very good name in general although difficulties with some of the smaller operators may well have cast a shadow over the whole industry. Sudden increases in service charges, demands for money and substantial delays in the completion of property developments have again caused many property investors to reconsider Dubai and in some cases withdraw their financial support. It would appear that many property developers are happy to use investors as their cash cow in times of trouble knowing that once they have put down a deposit and signed up to a property they are unlikely to leave.
Developers leaving the market
In the boom times the property development sector in Dubai was probably one of the most profitable of its kind in the world. Developers were making money hand over fist and prices were moving ever higher as demand outpaced supply. However, once the market turned down and many developers realised they had overstretched their financial resources a number literally shut up shop and disappeared into the night leaving many investors out of pocket with nothing to show for their troubles. This argument would appear to tie in with the historic weakness of the RERA (although recently this position seems to be changing) and the very low level of protection afforded to investors.
Overnight change in laws
Very few property investors around the world will have experienced the ever-changing regulatory and legal framework which covers the Dubai property market. Regulations and laws can literally be changed overnight as we saw with the recent reduction in mortgage finance and Sheikh Maktoum’s banning of New Year celebrations in favour of a more “sombre” mood in keeping with the plight of the Palestinian people. There have also been many other large and small amendments to laws and regulations, many of which have appeared by surprise with literally no notice or warning. Any investor dislikes such an environment where their position can literally change in a few hours affecting both their potential to make money and the value of existing properties.
Lack of customer service
As we covered above, the property development sector does not have a good reputation in Dubai. In the good times phone calls were returned swiftly but more and more investors saw their messages ignored and sporadic updates when the market turned down. This lack of customer service instigated a climate of mistrust and uncertainty which began to spread like wildfire when the boom was over ensuring a reduction in interest amongst investors. Yet again the legal and regulatory framework has been somewhat behind the times for a market which has attracted billions of dollars of investment although there are signs of change in this area.
Conclusion
This poll perfectly highlights how in the good times many investors are willing to overlook a number of negative aspects of the Dubai property market while in the difficult times these factors become more of a problem. There is no doubt that the development of the Dubai regulatory and legal framework with regards to the property market was very much behind the times until recently. It will be interesting to see how the outlook and opinion of property investors changes as and when the Dubai property market recovers and whether investors will again be willing to overlook some of the more negative aspects of the market as long as they are making money.