Safe as villas; How well insulated is DXB?
 

They say when the US sneezes, the rest of the world catches a cold... only this time it appears to be pneumonia.

The 'experts' on Wall Street and various government heads were heard to say only a matter of months ago that 'their economies was robust enough to withstand the current economic situation' before billions of dollars had to be injected in to keep it alive with major banks having to be nationalised, others going bust.

Similarly the UAE has stated their 'insulation' against the global slowdown but only last week 50 billion Dhms was pumped into the economy to provide liquidity... deja vu?

Projects in DXB and AAH are reported to be under review possibly delayed, hotels have seen a 5% reduction in bookings so far this year with businesses such as banks laying off staff and closing offices...

In Dubai considerable internal investment is needed to improve power, water and sewage facilities as it struggle to cope with current developments let alone future ones. Where will this money come from? VAT and other taxes, capital gains amongst them, are on the way increasing the burden on the expat population and making the place less attractive to all but those seeking to dry-clean their money.

What next? Many are still tempted by inflated promises of 25-60% property investment returns (one ad for 60% probably flashing overhead this thread now) when the rest of the world are seeing trillions of $s wiped from property values... With several loans from several banks they over extend and pay over inflated prices for substandard properties in the hope of a quick turn around... but how much higher can the pyramid go? As people look to covert their assets into cash and supply increases with decreasing demand prices will have to drop.

So my question is how insulated are we really from the effects of the 'outside world'? Can we really expect the boom of the last 6 years to continue in which case an average two bed apartment would be + 5 million Dirhams, a 3 bed villa 8m? Or is a crash imminent?

It was only a few months ago that the so called financial experts (an oxymoron if ever there was one) seemed totally oblivious to the looming crisis... now it is all they can talk about.

It's all about 'sentiment' apparently but fear is a far stronger sentiment than greed and as the fear spreads could DXB and the UAE be in for the mother of all corrections?

My thought logic resembles yours mensaboy, Reading it in black and white makes me understand it even better. The facts are there. All I need now is a crystal ball, well any ball that can tell me what the future holds. Now that would be wishful thinking, wouldn't it?. Needless to say I think you hit the nail on the head. I just hope the hit wouldn't be as hard or harsh as it sounds. let's see what unfolds...... Time to scratch your balls!!:ugh: Out to be some pleasure in that.

Gents

We lease aircraft from the institutions that are feeling the pinch, it's not only about Dubai's property - we'll all feel the blast from the sneeze

I still don't get it. How many people would have to default on their loans to create a trillion dollar deficit? About 5 million?
I must need more edjakating I spose...

Interesting stuff. I think that one way or another we are as not 'insulated' as we are led to believe.

Kingpost makes the valid point that it is not all about property but that is one of the barometers that will indicate change the quickest.

One or two of the banks are already in 'difficulty' with consolidation likely as seen in the US/UK. NBD have already combined with Emirates Bank and rumors of trouble in more than one UAE bank will force others to consolidate.

Less banks, less choice... sound familiar?

As far as the property market is concerned it will feel the changes soon as increased regulation combines with tighter credit. As regards the former, rent valuations will be imposed by the municipality as early as next year and the latter lower LTVs on 'higher risk' developments will make it more expensive to buy.

Villas should do better as apartments due to supply but commercial property? Who's coming to set up business where Dhm/square meter as gone up 10 fold and relocating staff is so expensive?

Add to this capital gains taxes to control the rampant speculation then change is inevitable.

Time will tell but insulated? No way.

I reckon that the only thing insulating the ME was the US economy and the high price of oil. If world demand reduces and oil prices fall, where do you think it will leave the ME? What other reason is there to buy overpriced property in DXB? Let's face it, if there wasn't any oil/gas in the ME , why would anybody go there? IMHO, I think commodity and oil prices will reduce to a sensible level ( where is anybodies' guess), and there will be a serious correction in property prices around the world generally.

Folks always remember the one fundamental economic priciple you learnt in high school. All economic growth patterns are cyclical in nature. This has been proved time and time again in different economies in different countries and with different assets. Just look at:

1) Dot Com
2) Global Real estate - particularly US, UK & Europe
3) Oil Prices
4) Gold prices (yes their high now but look more carefully - pre 1980's)
5) Bonds, equities you name it ....

Prices only go so far until investors realise the Emperor really isn't wearing any clothes and then the bubble bursts. People thought oil would go to 200USD per barrel... it only peaked in line with the peak in other major global economies. Now that growth in USA, India and China is looking curtailed so demand has dropped along with the price. Funny how many soverign wealth funds are actually insuring against the price of oil dropping below 70USD per barrel. Now why would they do that do you think?

The point is that the Dubai economy will tighten in time as inflation becomes rampant and the Dubai commercial banks realise that they too have been rather cavalier in their lending policy. Property prices will correct this is inevitable and i'll state my profit share (like we'll get any this year, NOT) on this. Its just a question of time. Maybe its time to realise some of those gains in property we've made.....

Dubai may have some insulation but rest assured the correction will come. Maybe not an all out slump but certainly a slowing of growth. As some of the other points have made above this is aleady starting to show.

Thought for the day:

Greed through excessive risk has killed the banking system in the USA. Hedge funds, short selling they've all contributed to it. If we learn to be less gready and use our heads we'll all be worth more.

Right that's enough b*ll***s for one day,LOL :ok:

Which is what everyone has been hoping for I think - rises of 70% in the past 9 months are totally unsustainable so and reduction to more normal rates can only be good for the future.

Hy mensa boy et all ---

i really don't know what You guys are taking to come up with these ridicolous figures like 70 % profit in 9 mont h-

the harsh fact is, that over-priced properties are already DECLINING significantly since some time - just villas are doing slightly better!

in the Marina & especially in the JBR-Area, prices went already down over 25% from its highs, as NOBODY wants to live in this crappy & dirty ghetto - with just one overprices Spinneys, but several russian hookers in every building anymore; with cheap-built highrises popping up like mushrooms everywhere, closinging the last green spots (if any!) there- just to stay half empty for years after completion (2 years after plan) thereafter & no green garden nowhere left for the kids to play ..
most Appartments in the Marina are just impossible to be sold unless massively discounted, as the nice water-Channel is now obstructed by another line of cheaply built stadardized high-rises - more dirt, noise & pollution right in everybodys neighbourhood! plus massive building quality issues for example in the JBR:
massive cracks in the basement & walls & consecutively several broken water pipes & sewage hoses - a total nightmare & owners desperate to get out of their ownership - wiping out their gains by doing that!
That's jsut why emirates put their new pilots in this new concrete ghetto like "Lake towers" as nobody else wants to live there - just like the 60% unsold nightmare-ish Burj Dubai - an isolated &ghostly place !
Villas in Springs & Greens & Arabian R.or Green Comunitiy doing however much better in the downward trend now, but are already losing as well from its highs, as building and quality issues require now - after merely 4 years time - massive renovation costs (new heating, new c a/c etc. pp, cracks, detached terasses, cracks in the pools etc.); not to forget the skyrocketing municipality costs - up betwenn 80 and 150% in the last two years in most areas!

So - anybody still considering to buy must be outright naive - to put it mildly - Realize it & face it - the boom & party in the sandpit is over :eek:- worse to come - Not for me - i'm gonna go back to europe asap - i just had enough from these greedy clowns here! You bet!:sad::E

Cyber I totally agree, the figures mentioned are examples of the the over inflated figures spouted by those with vested interests trying to sell bits of the pyramid they've been selling for the past few years.

The reality is, as you say, very different.

But it is pyramid selling none the less and the market is turning and areas such as JBR are feeling it with more to come.

Hmm.....

Sounds familiar.......

Seems that you have been forecasting a downturn ever since you landed in the sandpit cyber - :rolleyes:

Oh and please name and shame your 'colleagues' who couldn't sell anything in the past 2 years at a profit - I need a laugh :E

erased - Double-Post -

Those who sold in the Springs, Arabian Ranches & Green Community made some good gain - reduced however by the massive inflation of the weak Dirham;
however those who bouht on the trunk of the plam -where the opposite metro-line erased the projects water-channel & those who bougt in the JBR -made definitively losses - after subtracting their financing & agent costs!

Like it or not - these are the facts - and , NO, it doensn't matter for me, as my property is in Europe - as i don't wanna own anythin' here, as the climate & mentality is horribl, and i want to be able to take my belongings on the next flight back into a civilised country-
but hey, prsto, that's just MY thoughts - and these have apparently not changed over the past years, as you might have found out smartly :yuk:

and -as you see - others are sharing my poínt of view -which has not to be yours - that's fine with me:ok:

.

That pretty well sums it up. Pity that greed will forever remain the motivating force for a majority of mankind.

Incidentally, being only a simple pilot and not an economist, could one of the "experts" tell me who is holding on to all the money that is still surely floating around in the world? Who is going to be snapping up all those foreclosed properties at bargain basement prices to be sold back to the peasant masses (aka "hoi polloi") at yet again inflated sub-prime rates sometime in the future? According to some of the banking whizkids, there is still lots of liquidity in the market. Armageddon is not round the corner, at least not yet.

To paraphrase a famous quote which I have always felt has much to offer in the Aviation world- "Man has oft more need to be reminded than informed". We are forever reinventing the wheel, be it in flying or anything else!

If your 'colleagues' were that dumb that they couldn't make a profit in the last 2 years then I hope you take them back to Europe with you.

The 'facts' are that property prices have risen every year since the the law was changed allowing foreigners to buy.

This year demand and prices have risen - even in the Marina.

Prices and demand in DXB are bound to be affected by the present financial crisis but if you think that by going back to Europe is going to escape from it then you are as barmy as your mates who couldn't make any money in the last 2 years. :rolleyes:

What liquidity???? There is none. The small manufactures and companies in NA are already complaining of the lack of available funds/loans. The banks won't lend to each other!!!!!!! If they do it is at much higher rates and they are ALL gun shy about potential risk.

The money that was 'floating' around was built on risk and whan that risk finally materiallized the money disappeared - hence the current crisis/problems.

Anyone who thinks that Dubai will simply side step this is in la la land. The only questioon will be to what extent. Less foreigners will be investing money here--because there is none and those that have will not likley risk it in the bubble that has grown here. They're gun shy now.

As for the guys who have made money in the last several years = you should be happy for them!!!! However, have they made the money??? ie have they SOLD yet?? You have not made money (or lost it) until you sell. Till then it is all speculation.

The smart ones rarely buy at the low or sell at the high but make some money in between. Trying to guess the exact low or high is a mugs game.

The game has changed in Dubai. The risk now in holdig property is high. If you are holding onto it today or buying you may still see increases. The trick will be to sell while you can and while you can crystallize that profit.

Mensaboy - I hope you're not telling us that obama's going to be a better bet:ugh:

Cyberbird - you're talking total rubbish... (except about JBR - a ghastly place)

Trader - I've made a nice profit on property here, but to be honest money is not what drives me!! It just happened.. And it's 'fewer foreigners', not 'LESS foreigners'. You're not level 6 are you:}

Your predictions are of course super accurate which is why you've just sold your properties here and are actually writing this from the comfort of the sun lounger on the for' deck of your yacht in the Bahamas.
Pass the Pina Coladas please.

No Land 3,

You asked how many mortgages we are talking about, I could only come up with this from Wikipedia ''During 2007, nearly 1.3 million U.S. housing properties were subject to foreclosure activity, up 79% from 2006.''
The forcast rate for 2008 is higher still. I believe this stat indicates a minimum of 3 missed mortgage payments.

White Knight, you asked if I thought Obama was a better bet than McCain.
Abso-frickin-lutely !! It concerns and scaries me quite frankly, that you think otherwise. When we have a significant proportion of individuals who vote for the likes of Bush (twice) and McCain (hopefully not once), then disasters like the Iraq War and this financial crisis........... are to be expected.

I am open to debate about most issues, but not the disastrous Presidency of GWB.

If the bubble bursts in Dubai, it will be due in part to the financial crisis or at least accelerated by it. (there are other factors). The financial crisis is due to bad government. Bad government is due to people electing bad leaders. People electing bad leaders is due to ignorance and a lack of education, which is in large part due to bad leaders. This cycle is next to impossible to break! It has reached the point in the USA when either they completely altar the way government operates, or their fall from economic, political and military dominance will accelerate. Based on my observations, I think the latter is more likely, but I am ever hopeful that it won't. In any other democratic country on the planet, that government would be kicked out on their arses, to send a very clear signal. Stop the insanity.

My personal defence against these likely events, was to get out of the markets,with respect to any investments tied to the US, limit my exposure to the USD and sit back. It the carnage continues, then I have made a wise choice. If things miraculously change for the better, then I have lost a couple of years of investing time. Even now though, I am much further ahead than if I had done nothing.

I am hoping that miracles do happen. I do not wish ill-will upon anyone, even those who started this cycle. But when I see a $700Billion bill being passed, that has attached to it, 100's of millions of dollars being thrown away to Puerto Rican rum exporters, children's wooden arrow suppliers etc, I have my doubts.

Note to self - no more posting while under the influence :ok::ok:

Well mensaboy - it concerns me and quite frankly scares me that you think BO is the guy to bail the US and the rest of the world out..... The UK made a similar mistake when they put blair in and ousted the tories:=

Trader - I made that note to self a while ago:ok:

White K-

Don't get too concerned with any pronouncement from Mensabore - the last time anyone that self-absorbed walked the planet it was Jefferson Davis. And you know how that turned out.

Squeeeeeeze
 

The Squeeze has already started. Front page of the Gulf News today says that the two largest Islamic mortgage providers, Amlak and Tamweel are in talks about a merger. The spin is that it is to optimize their combined market position however those of us who have been here a while will know that what you read in the press is only what the "powers that be" want you to believe.

It is more likely an attempt to shore up two rather poorly managed companies who have in the past returned huge dividends in the boom time and have been able to take full advantage of regulations slanted heavily in their favor. Suddenly the market is not so favorable and the big bad world is out there waiting where government and regulatory protection have no jurisdiction. Only well managed and soundly structured institutions will survive the current crisis. Anyone who has had dealings with either of these companies will know that Amlak and Tamweel have neither of these attributes.

What will this merger produce? A short term boost in their share price and a merger resulting in one large poorly managed company with shaky foundations that may well fall in a heap if the current situation continues. Maybe I am reading too much into it but still food for thought.

Does anyone know where one stands with Islamic finance when the finance company goes bust?

Gulfnews: Negotiations: Steering panel set up

Totally unrelated to property, but:

The last thing the American people, and the world, need is another 4 to 8 years of right wing Republicans running around trying to force sovereign nations into becoming democratic. This at great cost to the American taxpayer.


Now on to property. At least a 50% correction in Dubai's high cost areas. Those areas with prices of 3000 to 4000 dirham/sq.ft. are going to get crushed in the correction. Anybody who paid more than 1200 to 1500 dirhams/sq.ft. for high end apartments or 800-1000/ sq.ft. for villas will lose money in the correction. If they are living in them and taking the allowance long term then it's not that bad.

Those who bought early at reasonable prices and are now leasing out their units are making a phenomenal return on investment. Those who were/are smart enough to sell prior to the correction have made phenomenal money.

Half the buildings launched in Ajman will never get built. RAK is a worthless investment unless you want to live there. Abu Dhabi is suffering a housing shortage and should hold up pretty well for the next few years

As with all bubbles; the steeper the run up, the steeper the fall.



Typhoonpilot

OK, I'm confused.

The crisis happened because banks loaned money that they didn't really have to people that couldn't really pay back. The banks knew this or they would not have given these loans a specific name, then marketed these loans to those that would have under normal circumstances not qualified for bank loans........

So now the really good part.....

This thing went bust....(BIG SURPRISE).

Now the US Government bails these banks out to the tune of 700 billion $$$. (Assuming that there are 140 million tax payers, that works to 5000.00 $ for every tax payer in the US.) This money (700 billion), is as I understand, only to get rid of bad debt. Where does the money come from to make new loans.

If I ran my household finances like this, I would be arrested and put in jail.......

On a separate note. With 305 million people in the US. The best two citizens that can be found to run the country happen to be McCain and Obama...........This to replace Bush.........Doesn't say much , does it......

Personally, I think this is what the government fears most- that people (the average man in the street) will wise up to how the system works, and what has happened to get to this point.

Money is a concept. Credit is created. It is a concept.

Goods, labour, physical assets; real. Money and credit; concepts. They facilitate commerce.

Yes, it is interesting how what one man does gets him a retirement on a yacht in the Bahamas, and another doing the same thing gets bankruptcy and jail.

Dubai, well, they rely on what exactly? The making of identical twin camels (truly), and a few other odds and ends. They don't sell oil, which is just as well as that commodity is heading south. They don't manufacture goods for a domestic market, so no assistance there. Lot of tourists, but when money is scarce...

Some jokers talk about bad government, meaning to say Republicans, when the reality is the housing crisis was created by Clinton in forcing banks to open up to non-creditworthy people, namely, Hispanics and African Americans (oops, lower socio-economic folks). Read up on Roberta Achtenberg, the whiz civil rights activist/lawyer who became Assistant Secretary for Fair Housing and Equal Opportunity at the Department of Housing and Urban Development (HUD) under Mr Bill Clinton.

But wait, this is about whether Dubai is in a fix, right?

The reality is we are all in the ****e so deep it's not confined to Dubai or the USA or even that oddball, Mensaboy. God, what an ego. Moving on...read up on credit fault swaps, and how enormous the overhang there is. Way back in 2001, they all but didn't exist. A mere seven years later, CDS amount to a mighty $60 trillion. That's right, trillion dollars, not billion. The USA's GDP for 2007 a mere $13 trillion, so we're talking about a problem that $700 billion in bailouts for banks won't even begin to make a dent in.

Is Dubai in trouble?

We all are, and that's not subjective. Credit default swaps are used as insurance against default when the distressed asset, usually a bond, should be sold outright because of its junk status. In other words, there are more than $60 trillion worth of distressed assets out there that will tank to nothing, just like AIG, and soon, now that every bank this side of the sun is being made acutely aware of how the market can no longer support the level of debt overhanging the wider market.

Hope that's not too much to digest.

Not wishing to be confrontational, just merely curious (or maybe simplistic); assuming all the money and wealth (generated over millenia) has not been spirited away by aliens, my question still stands; who has got it now? China? India? The Mafia? Al Quaeda? Money does change hands after all.

Seems to me there may be some global hidden agendas at work here. Lot of media chat in some quarters about the imminent downfall of the western system (aka the US inspired democratic/capitalist way of doing things). May need looking into. If the model is about to fail, then we had better all pay attention. Or perhaps it's a case of the Roman gladiator chant - " Eat drink and be merry, for tomorrow we die...". In the case of the USA, it certainly seems like a willingness to pass the problems on to later generations to solve.

Money and wealth are two very different things. "Money" changes value constantly- witness exchange rates. It can certainly be spirited away by "aliens"- witness Zimbabwe. Zim is actually a good way to think about the topic. You may have some Zim "money", but what do you actually have, one day to the next? Money only has value if you think it does. It is a means of lubricating commerce.

Likewise the property market- it relies heavily on confidence. Something I was taught by a wise man when I was young: Land appreciates, buildings depreciate.

Amen to that, and just do you think is actually giving Obama his economic advise, That's right Mr. Franklin Raines who presided over Fannie Mae and helped precipitate this God awful mess we find ourselves in now.

Also on the team are Harvard educated economics professors David Cutler and Jeffery Liebman, who also "Surprise Suprise" worked for Bill Clinton in his administration.

Anyone who thinks the Dummycrats are going to lead the US out of this mess, truly need to do some homework to find out how this crap started in the first place.

Rant over.
Let the beatings begin :eek::eek:

Reality bites for Dubai property market boom....
 

This link is over a week old, an eternity in the current economic climate:

Reality bites for Dubai property market boom - Times Online

Share indexes continue to sink worldwide as US and UK bailout plans fail to buoy the markets.

Dubai and the UAE will see the decline in tourism and investment from those countries most effected, Europe/USA. Businesses will close as they consolidate and reduce costs. Local companies such as EK will see a fall in pax numbers and therefore yields. Recruitment has all but stopped.

It will take many months to feel the full effects of the global economic Tsunami... but we're all going to get soaked wherever we are.

I wonder where all of this leaves FlyDubai? On another thread there are reports of them stopping interviews, does not seem to be a great time to start a new airline..or does it?

Considering AIG was one of the foremost institutions providing financing for aircraft then it might be a little harder now to find the funds for 57 aircraft.

Fly Dubai and EK depend on the constant expansion of the UAE and its economies so if they do slow as we suspect then the effects will be felt directly by them.

Hysteria hits Gulf markets...
 

"GCC bourses shed $150 billion of capitalisation in three days"

7Days today.

Dubai financial market dropped 5.14%, its lowest level in two years with Abu Dhabi securities down 4.6%. Emmar especially hit dropping a further 2.14% following earlier losses.

Brace, brace.

Well, Maroons doomsday prophecy will at least help the accomodation mess. Villas will become abundant and so cheap to lease, that everyone will get theirs in weeks from now. They'll even start accomodating the FlyDubai guys, instead of paying them 170k ...... :ugh:

It's not a prophecy, it's happening.

BBC NEWS | World | Middle East | Arab shares see partial recovery

Your not that stand-up comedian who was the Irish Village the other month? :ok:

It IS doom and gloom. Most (so called) experts agree that the world is already in a recession and the best case scenario is to avoid a depression. If they truly were experts, they should have been predicting this for years.

It was less than a year ago that these experts were saying China had to control it's 'out of control' growth, for their own good. Well that is happening. although not in the best way.

I still stand by my assertion that Dubai is one of the best places in terms of financial security. The GCC countries have a combined 2.3Trillion dollars in reserve. When coupled with the relatively low populations, that number becomes even important. The governments in the GCC also have the ability to react in a unilateral and rapid manner, and hopefully they will institute the correct policies (not a foregone conclusion) At least they have the capability to weather the storm, something that is being questioned of many other countries around the world.

I thank my lucky stars that I came to Dubai and EK. If not, I would be sweating bullets back home (or already redundant) This financial mess will certainly affect Dubai but I am convinced that it will not be to the extent it will damage most places.

If people no longer make big bucks on property in Dubai, then that is far less suffering than I predict for developing and developed countries. In fact, a decline in property value should benefit most residents of Dubai. (Disclosure; I own property in Dubai) The bursting of the bubble was inevitable, it has only been accelerated by this financial crisis.

Good post mensa - I cannot think of another country where it will be better to ride out the coming storm.

The GCC have a budget surplus of Billions of Dollars - compared with the massive (and growing) budget deficit's in most other parts of the world, if any place is going to survive in a fairly calm manner then this is it.

Of course what also helps is that the government controls practically every aspect of life here - so can take actions that other countries can only dream of.

I would also point out that the 'experts' were saying only a month ago that oil would never go below $100 a barrel and some were forecasting $200 by the end of the year.....................:rolleyes: