Buying Property in Dubai?

[critical winge]

I know that there have been a few people that have made good returns on property in Dubai in the last couple of years, but is it still a good time to buy?

Of course EK would be paying a fair portion of the mortgage by using the living out allowance, but as infalation spirals out of control there are worrying signals. In a recent thread relating to a Gulf News statement about life in Dubai, it stated that the cost of living spirals upwards and wages cannot. The reason for this is that easy extra money fuels infaltion as things are made more expensive due to the greed of the seller and the extra cash in the buyers hand. So maybe thats why EK don't give record profit share for record profits, so as to help slow inflation down, maybe? So where is that statement going you ask? Well if there is a determined effort not to offer home basings, despite the now large workforce, then it is because the greed masters want EK pilots to spend money in Dubai. A house has now almost doubled in price in the last 2 years and even for EK pilots, in todays Dhms, 3MDhms + for an OK villa is getting out of control BIG TIME. No only that, you will probably have to bring your own cash over from abroad (20%deposit) to help fund building their city (your villa).

Of course there are arguments both ways if it is a good idea to buy now or in the future. Of course living in company accommodation is a sure answer to taking none of the living out allowance home, whenever you depart Dubai. But when you calculate the cost of the allowance on a 3Mil home with say a 20% deposit, you will have to pay about 10K ontop of the company contribution and pay all the utilities as well. On the other side, you could always save the 15k or so a month and over the long term, if invested out of the country properly, would probably make you the same return should you consider a 15 or 20 year projection (if you could stay that long in the ME). There are lot of other worries to consider with the purchase or re-sale.

For eg
Some lenders won't give a mortgage on some property as they know that the build quality is not acceptable for the said investment.

The property laws here are trying to make sense of giving the purchaser a feeling of control that they own the property, even though a new highway might be built through your backyard.

Buying a property doesn't give you any more rights to Dubai than a tourist, what if you were unavoidably thrust into a dispute with a local (car accident etc) and it ended in violence and you taking a flight out the next day, what price would you get for your property?

Is there a stable tax system on buying, selling, utilities, waste collection etc, do you forsee a possible unavoidable increase in the costs.

Is the ME a safe place to invest in. The panic selling on the sockmarkets has seen the lack of stability in investing in the ME. If the property market were to take a bit of a correction, would that see all those who bought several properties panic sell also, creating another unpredictable investment market.

The list surely goes on. the reason for the post was just to consider if it is now worth buying property in Dubai anymore as prices are almost out of reach, even for high paid expats.
CW

[BigGeordie]

If you want to buy somewhere to live in you will need to put a lot of money in on top of the utilities allowance but you certainly don't need to spend 3M Dhs to get somewhere as nice as (say) Silicon Oasis or an apartment on SZ road if you don't have kids. The allowance will just about cover a mortgage of about 1M Dhs, on top of which you have you water and electricity, housing tax (sorry, "fee") and so on.

However, rental returns in Dubai are still excellent compared to the UK- I don't know about the rest of the world but I think Dubai is near the top. Let's face it, Dubai is a very landlord friendly place. If you want to get into the property market why not buy an apartment and rent it out? Rents can't keep going up at 15% a year every year for ever but it should still be better than the provident fund.

[Payscale]

Damac investors lash out over construction delays
By Khaleej Times Scrutiny Investigations Team

2 June 2006



DUBAI — Investors in several of Damac Properties' residential construction projects are threatening to withhold payments from the company in protest over the firm's failure to finish buildings on time. Damac, which started life as a catering company but now bills itself as Dubai's 'largest private property developer', is facing an unprecedented backlash from residential property investors who bought 'off plan' apartments in advance of construction.


Buyers are furious over repeated delays in construction, contractual wrangling over compensation, complaints over interior finishes and poor customer service. Of the five projects (out of its advertised 15) Damac has started, all are running substantially behind their projected completion schedules.

Damac's problem projects are:

The Waves — was due for completion May 2005, now projected to be finished mid-2006

Ocean Heights — originally scheduled for the end of 2007, then delayed to June 2008, now will not be delivered until end of 2009.

Lake View — originally scheduled for completion by December 2006, construction will not be finished until first quarter of 2007, with the project's landscaping not ready until December 2007.

Jumeirah Lake Terrace — tower delayed six months until the end of 2006, with the showpiece lake and landscaping not ready until the end of 2007

Marina Terrace - Damac's first residential tower, delivered 14 months late. Was due for completion in October 2004, buyers were only given keys in March 2005. Subsequently, two floods from burst pipes caused damage to several apartments. Damac CEO Peter Riddoch has written to buyers apologizing for the 'protracted' delays in delivering apartments.

Many buyers have bought Damac properties as rental investments and are concerned that they will be unable to start earning income from their properties for years to come.

One Lake Terrace investor said: "Regardless that the apartment might be ready by the end of 2006, if the lake and landscaping are not completed for another year after that, I will never be able to rent the property while the project still looks unfinished and still resembles more a construction site than a place to live."

The Khaleej Times has learnt from buyers at Lake Terrace and Ocean Heights developments that a number of them have told the company they will hold back scheduled payments. Buyers are even discussing organizing mass withholding of payments.

The company, whose website boasts '4500 happy home owners' - markets heavily in the UK and Europe, but is now also receiving unflattering coverage there. Laurie McWhan, a The Waves buyer, told the London Times newspaper: "Three years after I made my investment, I don't have my house, a year's potential rent of £12,000 [Dh 82,000] is down the drain, and all they have offered me is a few thousand pounds in compensation. It's scandalous." Damac relied on wide-ranging 'force majeure' clauses to minimise contracted penalty payments to owners at Marina Terrace and The Waves.

Damac's delivery problems are adding to jitters felt by many of the Emirates property investors: particularly in the wake of the 'The Light House Affair' revelations. Developer Emad Ayoub fled Dubai in April having taken Dh14 million in advance payments for 'off plan' apartments. His Light House marina project, which was due for delivery in April, never made it past the foundations and Ayoub, after blaming 'unforeseen

technical difficulties' for the delays in construction and promising the project would be completed, is now in hiding in the UK and being pursued by police and investors' lawyers.

The levelling out of recent property price rises and the predicted oversupply of new apartments is also adding to anxiety over delayed projects and the increasingly public grumbling over Damac's construction delays and other apparent problems now appears to be having a knock-on effect with newer developments.

A Damac salesperson, who spoke on condition of anonymity, confided that Ocean Heights remains undersubscribed with a significant number of

apartments unsold. The Khaleej Times has also learnt that poorer than expected sales have led the company to offer unsold apartments at prices below their original offering price when the towers were first marketed.

The company has also launched more unusual sales incentives.

Following on from its Jaguar car offer for new owners, the company is now offering free tickets and business class airline tickets to see World Cup 2006 in Germany.

Despite almost universal praise for the daring and elegant designs of the exteriors of Damac's towers, buyers have complained about their interiors.

Bathrooms and kitchens in Marina Terrace have been described as 'cheap', 'poor' and 'horrible', with much criticism levelled at the tiles and finishings. At Marina Terrace and The Waves, much of that material is supplied by Damac's own Omani subsidiaries Al Shams and Al Amana.

Many Damac investors have resorted to online forums to express their disappointment and anger over what has happened to their investment properties. One buyer raged: "Damac are falling back into mediocrity and when they do, nothing will sell at the exorbitant prices they are expecting.

"People will see through them and this will have a effect on their future projects. Maybe they want to be blind to that fact, who knows? They will learn the hard way I think."

Another wrote: "If everyone says their interior finishings are crap, their reliability appalling and their customer service non-existent (and EVERYONE DOES!), then Damac are really wasting their time."

[Snake man]

Critical Winge,
The last 2 quarters have seen the Dubai stock market plunge a staggering 40-50%. I'm no economist, but conventional wisdom seems to indicate that the house market will follow the stock market.
That means the poorly constructed piece of brick and mortar in the middle of the desert you are mortgaged for to the tune of 2 million will now be worth 1 million. "All is not lost!", you cry, "the utilities allowance covers most of it!" But what about the deposit you paid? And what happens 3 years down the track when you land that dream job elsewhere in the world? Or EK sees the light and offers basings......OK, OK disregard my last! I'm sure you get the point. Somewhere along the way, 1 million has disappeared, and that provident fund you thought you had will be held to cover the shortfall.
Big Geordies' advice assumes you buy the apartment to rent out, but still keep your company accomodation. Good for you if you have that kind of cash lying around, but if you're borrowing it, remember to off-set the interest on the mortgage you're paying against that whopping profit you're making renting the place out. The net result remains the same however, if the market takes a tumble, you've lost a lot of money.

SM

[stoney69]

you can be the sceptic or "readin between" it all ..make an informed, calculated decision. Contacted has made some excellent points, those are real. if you're in for the long term ..be it property or stockmarkets ..there are returns

the crashes the stockmarket has witnessed is more to do with "maturin" process of investors, and less to do with the spinners

consider this, with the current climate that we're in ..possibilities of re-evaluation of the dirham, dollar unpeg, creation of a common (gulf) currency based on a basket of currencies etc will at some point be debated by the principals. the 1m "loss" in one place gets the injection of similar, possibly more from other unrelated areas

bottom line, investment of any kind is an investment ..and cannot be the easiest with no guarantees on returns. you're not gettin any smarter by seekin advice of self-proclaimed investment advisors, or people "who have been there", do what you think is right, when you think its right

[Chimbu chuckles]

Honestly I'd wait a year or so...look around you at the manic construction and ask where all the tennants are coming from and what will be the big recruiting requirement...even the local rag is starting to ask questions...and suggest that without a DOUBLING of expats in the next few years there will be a massive oversupply.

I think the pop up real estate 'developers' are in for some charachter building 'maturin' too before long.

'Built on sand' springs to mind.

[Snake man]

Stoney69 (not the self-proclaimed investment advisor) advises:

"bottom line, investment of any kind is an investment ..and cannot be the easiest with no guarantees on returns. you're not gettin any smarter by seekin advice of self-proclaimed investment advisors, or people "who have been there", do what you think is right, when you think its right[/quote]"

Excellent, Stoney. So pick up some Enron shares just before buying that farm in Zimbabwe. Hang onto it for about 17 life-times and I'm sure you'll do just fine!

SM

[High 6]

Have been advised from Tamweel that the number of new villas has been capped at 7000 by Dubai authorities, however no limit to the number of new apartments that can be built. Their advise is that Villas will always be a good investment but apartments are a higher risk. Can anyone else confirm this??

[Snake man]

"Have been advised from Tamweel that the number of new villas has been capped at 7000 by Dubai authorities, however no limit to the number of new apartments that can be built. Their advise is that Villas will always be a good investment but apartments are a higher risk. Can anyone else confirm this??"

I take it this advice was given buy the same guy who is actually trying to sell you a villa? Are these the same "authorities" who said rent increases would be capped at 15%? Maybe he means 7000 villas this year? Who knows for sure? Hey, why not nip down to the department of ????? and make sure for yourself by asking to see the "Capping of new villas for all time in Dubai to 7000 decree".

SM

[Trader]

Personally I would wait.

The stock market in DXB is the perfect example. Notice that the 'crash' happened after they opened it up to outside investors. As soon as they went public that they were opeing the markets to foreign money I knew the jig was up---prices had risen and liquidity dropped to the point that they needed outside money to prop prices up.

Housing looks the same. Rapid development to the tune of ten of thousands of units--who is going to buy or rent them. In the ME with the 'money is no object' attitude they build and build with little regard for true economics. My only fear is that the big developers who are also in the rental market will simply increase rents when there other investments don't perform. They want their money one way or another. Then, sooner or later, the whole house of cards comes tumbling down--and it will at some point.

If you can buy 0% down and keep your investments in your home country it might be a good deal--especially if the allowance covers the mortgage--but prices are too high for that to be realistic. At least from what I have seen.

A good example is the Financial Harbour in Bahrain. Apparantly the big banks don't want to move offices. The Kingdom threatened them with penalties to which the banks simply responded - then we'll pick up and move to Dubai (or anywhere else). Watch now for those building to be tenanted by government ministries!!!!

[StarWinder]

The fundamental problem with the Dubai property market is that it is not an open market. As foreign national you can only buy designated freehold properties - and I would bet my bottom dollar that these are overpriced and avoided by locals.
Drive along SZR and - if you are a rational thinker - you will wonder where on earth all the buyers for these thousands of apartments are supposed to come from.
Also, cost overruns are virtually certain, as particularly Indian labourers are finding better-paying jobs at home (without the added risk of agents ripping them off up front). So, it's either higher final costs or lower grade quality to offset the higher costs.
I would certainly not buy in now.

[alghaita ganga]

Just remember also that to be in unauthorised debt in most country of the moyen est is to be in prison. Not a nice thought eh?:hmm: