Dubai's Palm Jumeirah sees prices fall over 40 pc as crunch moves in

[FlyingCroc]

Here we go again

A few weeks ago we discussed this and some blokes bragged about how much money they made, 300% etc. And now, those who bought the property now are not laughing are they. Greed is the root of evil here.

[casio man]

Double Standards?

Why single out the UAE and the Gulf? Aren't these evils everywhere?

I would think that Wall Street USA would have first dibs for Greed...

[shazar]

BBC has a good report in Arabic.
http://news.bbc.co.uk/hi/arabic/sci_tech/newsid_7739000/7739718.stm
Another link in English here
http://news.bbc.co.uk/2/hi/middle_east/7693614.stm

[captplaystation]

Sounds more like an estate agents ( fingers crossed & hope for the best ) sound bite ,rather than in depth analysis, at least in the English version.
It's never too early to panic, or indeed to call your solicitor (as the old ads used to say.)

[Ketek400]

"Safe as houses" Property is useable. Owning property in the long run, is always the way to go. Might be down now, but it has just been unrealistic the way property has been performing in the Gulf. It is now coming back to real world figures. Pay for what you get. If you payed too much, then you are in trouble. If not, you will always be smiling.

Good luck! Dubai is not the only place in trouble. It will take a while.

[kingpost]

Contacted

Be careful not to stick your neck out too far. So what if the values go down, the rental will go up because of the supply shortage, no one is lending so developments will slow - simple economics 101.

You must be one of those that wished he'd got in the market prior to June 2008 and now gloats that you've got nothing - the property owners wil still have a great rental yield as a pension support.

[Wizofoz]

[QUOTE] the rental will go up because of the supply shortage, [QUOTE]

No, it won't.

Most properties were being bought to rent anyway, so there are no fewer rentals on the market.

Because of the number of redundencies, particularly amongst middle management types who make up the bulk of the villa rental market, and the number of people that just won't be coming, what there WILL be a shortage of is rental CUSTOMERS.

You can expect a collapse of rental returns as well.

[Jet II]

Originally Posted by Wizofoz

You can expect a collapse of rental returns as well.

May well happen but no sign of it yet.

Apartments in the marina are still giving 10% yield so there is still a lot of 'give' in the market and there will still be a decent return.

[BITE System]

Depends when you purchased your property. Yields can be as high as 20% to even 23%

[ferris]

What depreciation are you applying to get a yield like that?

[Jet II]

Originally Posted by BITE System

Depends when you purchased your property. Yields can be as high as 20% to even 23%

I'm talking about prices that are applicable today.

In fact I was talking to an investor here and he bought 3 properties last week to rent and his yield is almost 15%

Originally Posted by ferris

What depreciation are you applying to get a yield like that?

Not factoring in any capital depreciation or appreciation - nobody can see into the future which is why I apply sale prices from today.

[FlyingCroc]

The truth from today

is not the truth from yesterday. And so good luck if you bought rental property. All the prices were and are overinflated. For heavens sake, with the prices for apartments here in the Gulf you could buy also in New York, Miami, Paris or the French Riviera. And with a lot better quality and security in the future. Don't buy if you can't live in it yourself. And watch what they are going to do with the $40 a barrel oil price here in the Gulf.

[Jet II]

Originally Posted by FlyingCroc

And watch what they are going to do with the $40 a barrel oil price here in the Gulf.

Oil, over the long term, is only going one way.

Once the world economy starts growing again then the same fundamentals are going to kick in that pushed oil up earlier this year - hoping that oil stays below $50 is just a that - a forlorn hope.

[Wizofoz]

Jet,

It wasn't fundementals that pushed oil prices up, it was speculative money flowing out of the US housing market.

It was the fundementals that brought it back down!

[Jet II]

Wiz - do you really think that the market price in a growing world economy is less than $50 a barrel?

The IEA estimate that production will need to increase by six times the current Saudi output to meet expected demand in 2030.

[Cyberbird]

...i surely think, everybody who still thinks investment in real estate/ property is smart - should better think again - and read this ...

Economic slowdown puts an end to glitzy property parties in Dubai
Sunday, 30 November 2008 Middle East property news | Middle Eastern real estate news

Glitzy property parties in Dubai come to an endGlitz and glamour are being erased from the real estate sector in Dubai as developers cut back on their entertainment budgets.

The recent extravagant opening party for Atlantis is likely to be the last of the big events for some time according to officials as the global downturn means money is tight.

Almost half of the emirate's real estate launch parties have been delayed or cancelled as a result of the cooling property market, according to corporate event organisers.

'Corporate entertainment, team building and entertaining, they are being put on hold,' said Biju Jayaraaj, CEO of Dubai-based events firm Artaaj.

Dubai's booming real estate sector has become synonymous with extravagant launch parties. In October Hollywood power couple Catherine Zeta-Jones and Michael Douglas attended the press conference to launch Nakheel Tower while Enrique Iglesias performed for guests as the launch of residential development Dream Harbour in August.

But the most expensive opening event to date was the $20 million opening party for Atlantis on the Palm Jumeirah which included a private concert by global superstar Kylie Minogue.

There is also a feeling that with property prices falling up to 40% and more and buyers struggling to get mortgages and meet loan payments then a show of extravagance sends out the wrong impression. Also marketing and advertising budgets are being slashed.

That means that the property downturn is now having an effect on the events industry. Jayaraaj said that the company is now looking to refocus its strategy away from real estate.

Simone Sebastian, events producer at Dubai-based firm 9714, said four of their large real estate events had been put on hold indefinitely in light of the slowdown

so . there You are - lots of negative press of the Dubai Real Estate Market -

one of the biggest INDEPENDENT newspaper /which is actually in German/ biggest economy in europe: The Sueddeutsche Zeitung states this weekend/ if You can read it - i barely could, as i worked there on a contract for some Years .. / states ((unlike the propagada Government sensored Gulf-News & @% alike ...) the harsh truth of dark clouds hanging over dubai, which has 80 Billion loans to pay compared to a annual (!) GDP of merely 40 Billions, which are dwindling as i write this .....

DUBAI in BURNOUT-Crisis - Collaps not unlikely!

and pretty much the same tenor in all other INDEPENDENT papers ..

like: http://www.easybourse.com/bourse-act.../hsbc-holdings

Job losses hasten property decline in Dubai

Wednesday, 03 December 2008

Dubai job cuts hastens downward spiral:
Job cuts in the Middle East could hasten the downward spiral of property prices but a sharp drop in prices could actually make the crisis medium-lived, analysts claim.

The price correction in Dubai's real estate market will come sooner and be steeper than anticipated as demand falls amid the global financial crisis, according to Egyptian investment bank EFG-Hermes.

It is still predicting a 30% correction in Dubai real estate prices by 2011, but that the fall would come sooner than previously thought.

'While EFG's forecast is still for a 30% decline, this has now become very front-end loaded and with risks significantly skewed to the downside,' said analyst Raj Madha.

The global financial crisis has hit demand for real estate in Dubai from foreign investors, which make up the large proportion of buyers, while tightening liquidity has made home financing much more difficult.

Added to this, Madha said, is a glut of new properties expected to come onto the market that could be harder for the market to absorb if immigration falls as companies cut jobs amid the crisis.

'We are currently seeing significant distress in the property sector, resulting in several major developers cutting headcount. As for financial services, we expect that with the local index declining over 60%, there will be less revenue to go around, and therefore less revenue to justify the current staffing requirement,' he predicted.

New properties coming onto the market could see rents decline, meaning Dubai would be better placed to market itself to industries that have increasingly been priced out of the market, he added.


Well, than it will be good times for buyers soon: with price-levels will be some 40 % lower in Bout half a year - which is MY personal guess, as i know by an owner @ JBR,that they actually have to pay the security people to go up & switch on the light in the ttally empty towers, which are still NOT sold, as they should look less ghostly @ night then !?! Fake as whole Dubai i guess - I fell really sorry for that city; it had its chance, and obviously totally missed it !

[FlyingCroc]

Downward spiral

Usually you see in the Gulf News two pages of colorful property advertising, yesterday there was none.

[bigmountain]

Having read all the submissions for and against the property market in Dubai.
May I add my two bits.
There will always be a section of the population that will consider the Gulf as an area of uncertain calm and will try and justify their decsion not invest in a "volatile " area as the middle east. You can't blame them . They perhaps have a risk tolerance level that just does not allow them the "luxury" . I myself initially was aghast at the flurry of or shall I say "mad rush" to purchase the first free hold villas on the bases of photocopies of off plan properties at Emaar. People were lining up in the early hours of the morning to be the lucky few to put down a deposit. There were detractors then and there will be detractors now. People call this a fly by night operation. The"wise" advised to put money in more mature markets like Europe and the Us......... Now 2008 and what do we have. The Stock Market , the property market , business , airlines GM GE , you name it ,have all headed South.. Had one invested in any of the Markets in Europe America , all I can say is that you would have done much better had you had your money in the property market in Dubai and UAE.

As in any market,the higher the risk the higher the reward. Surely no one can argue against the returns they have made and continue to make in Dubai and the UAE. Yes Dubai and UAE are part of the Global Economy and they will have to be prepared to weather the Storm. However the Storm that the UAE is experiencing is passing right over the Major Economies of North America and Europe , while UAE is only experiencing the strong winds and currents that are by-products of the mismanagement by the so called "czars of the global economy".

I will not digress too much on the failure of the Global economy . I shall leave that to the Economist and the like to ponder over such issues. However back to the matter at hand ; the property market.

Yes there is currently a "lull" and so there should be one. Some may call it a "lull "before the "Storm" .Ordinary people , investors , speculators and just watchers on the side lines all have an opinion. Is the Glass Half Full or Half Empty?

The facts are that
1) There is a housing shortage for every type of dwelling . Be it International City or an apartment on Shk Zayed Road or for a Villa for Emirates Staff.
2) Every so often you will see a report published in the press that the market will correct in 2008 .Only to be revised by another " research paper that we will see a downward trend in 2009 and only recently again another report from a private Capital investment house stating that we can expect to see prices moderating in 2011. Meanwhile prices of Villas on Palm and the Emirates Hills have shot up astronomically. Prices in Victory Heights and Arabian Ranches have shot up 30%-40% in 8 months. The Marina and Jumeriah LAKE TOWERS all are offering off plan investors 100% returns . Thats approx 30% yr on yr. Yes they have all moderated lower .You cannot find villa to rent out in Meadows or Springs . Major population is being uprooted in Satwa and I suppose shortly Karama. Where will they move. "International City" I would assume. Had you invested in a studio 2 1/2 yrs ago You would have paid close to 230,000 Dirhams ( in easy installments) including a premiums. Today you can command rentals in the 45000/- range and prices for Resales vary from AED 450,0000/- to 500000/- Not bad yields even if you bought today.
For those of you waiting for the market to fall, I would recommend that they don't wait too long and put their money elsewhere; perhaps in Europe and US now as their risk profile doesn’t match the investment style in UAE. Notwithstanding the "flip artiste" may I suggest that there are opportunities for some of our fellow investors who only wished they had a second chance. Well “chance”, it has presented itself . Prices have moderated and offer opportunities to End buyers to “ dip their toe”( studio . One bed) or “get their feet wet” (ready Villas, Meadows Arabian ranches ,Springs ,Green community or Palm Jebel Ali Garden Villas -2011) Now you can take your time . Estate Brokers will follow up on your calls , you will have a choice of options and can have time to sleep over it . So whenever you do decide , it should be a calm and considered decsion. But rememeber this is till the end of the Year. Dubai is not going to sit still. It will come p with some innovatiiove idea to kick start the economy.

For the shrewd and savvy investor who is willing to ride out the peaks and toughs of an investment cycle, the UAE has a lot of potential. Its still a growing economy . For those who cannot match the investment required in Dubai and AbuDhabi need only to look at Ras al Khaimah and Ajman. These are relatively new areas, but offer the advantage in allowing potential investors to track the Developers track record in Dubai and so hedge their bets somewhat with reliable builders with a history. Lost an opportunity on the Palm Jumeriah. Why not try Marjan Island in Ras al Khaimah. or Boris Beckers "turtle shaped " Sports comlplex" and Resort all tied into one. Various options with easy installments plans between 6 and 15 yrs are offered.

For someone who can't be bothered in investing in property , there are a few Investment vehicles offered .Eg EPI 20% Property Concepts Dubai 30% and Arcadia 22% A littlle bit of research and a chat will allow a person to decide which way to go.

One must remember the UAE property market has provided really astounding returns on the back of really poorly performing stock markets all around the world. This is because the market is fairly new as compared to more mature markets of the world such as Europe and North America. In the long term one can expect a consistent growth that will provide a hedge against inflation. The speculators, meanwhile have probably taken all the money out of the property market and working on investing in the Stock markets that are looking very promising .........Maybe not just yet!.

Summary enter into the market if you can pay your mortgage with the expected rental returns. This has been true for off plan investments and to some extent on some resale properties. e.g International city studio 500,000 -Annual Rental 55,000 Discovery Garden 600,000-70000/- Rental 75000/-(annually)
If the sums don't add up then don't get into it. Still feeling itchy then take your cash and have a talk with one of the property investment syndicates/ property investor groups . Still not happy put it in HSBC and get 5% . Last checked Gordon Brown is Guaranteeing your money. Still not happy put it under your mattress.

Dubai and UAE are still growing economies that have somewhat slowed down ; just like any other economy .Nevertheless their growth rate is still an enviabe pace as compared to other economies that are into recession.
I believe the Glass to be Half Full
Cheers
BM

[FlyingCroc]

Great post for Dubai

However, why are almost all the properties empty? And yes there is a 50% depreciation on the property. And a lot of people lost stocks in the Gulf. And we have 40$ a barrel for the oil which will not help the economy in the Gulf. And who wants to spend a f@$%& 55'000 DHS rent a month in this dustbowl? This is a crime, not even in Manhattan or Paris you would pay that much for a top luxury apartment, this is fleecing and will be punished with jail in most countries
And yes 5% interest at HSBC with a 20% inflation rate, go figure. I guess a lot of guys are in a hurry now to exchange now before the $ plunges into the nirvana.

[fo4ever]

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