SkyscraperCity Forum banner
1 - 20 of 128 Posts

· Registered
Joined
·
125 Posts
8% net or 10% gross is good IMO
I've been on this forum since 2004 under a bunch of different names, yes this place has gone stone cold. :dead:

In the last 14 years or so I've built up a portfolio of nearly 50 rental units- that I still hold- in Dubai. I'm proud of Dubai for the most part.


Investor friendly?

One thing I see today however in the market is that there is not that investor support there once was. The support that enticed us to come and invest in the first place.


Rents and Much Needed Capital Appreciation

In order for me to buy into Dubai today I have to be convinced (by Dubai) that rents will increase over time. That the government supports this growth too.

Why?

Because ultimately rents (and only rents) determine my next sale price in Dubai. If rents go down, the capital value of my investment will follow.

Lack of capital appreciation is bad, and devastating to net worth over time, particularly with a mortgage involved.

Couple this with institutions such as the Dubai Rent Committee and the media allowing a general disdain for the LandLord and I get slightly nervous.

I am not being overly sensitive here, but we were told to come and put our money into Dubai way back when, with open arms.:heart:

I feel we have been sent mixed messages - are investors wanted in Dubai or not?



Mortgage products and Banks

With the fed rate (and therefore EIBOR) rising and rents lowering, the prospect for those investors who are leveraged in the market does not look great.

Leverage is good, banks should be as supportive as possible of the investor in this regard. A mortgage is an excellent growth tool. Growing the investor of course helps to grow Dubai.

I feel the mortgage market is EXTREMELY shark like here. I've seen all the tricks at sign up, that quickly turn sour, being used. :nuts:

If Dubai really is investor friendly she needs to put a strong sense of social conscience on the lending banks today, right now, as the market begins to face the challenges of rate rises and lowering rents. This is not hard to do, they are profiteering in this area big time.


Collapsing yields

If you do get a high net yield I feel that today this is extraordinary in residential (8 percent net plus). We can manage this with a few tricks, like throwing in some furniture in our own portfolio, but let's say it is definitely outside the norm.


The effect of yield compression means as rents come down yields start to look very pedestrian in general. Any further yield compression and capital values will follow.

If rents stay steady capital values will hold at these lower (compressed) yields.

But But but but there seems to be no prospect at all (in a universal sense for Dubai) that rents, and therefore the all important capital value of your investment, will increase.


The million dollar question for me is...

Where will my growth come from over the next five years?


FX Rates Matter too-I also face a likely 20 per cent loss on my home country currency over the next few years to factor in too. Growth must be therefore 'at least' able to cover this.


Short version: More supply, lowering rents, costlier borrowing, poor mortgage market, Very bad investor sentiment & support- means poor yields and no growth prospects in Dubai medium term. Prospect of a weakening Dirham Long term too for some of us.


:cheers:
 

· Registered
Joined
·
125 Posts
I've been on this forum since 2004 under a bunch of different names, yes this place has gone stone cold. :dead:

In the last 14 years or so I've built up a portfolio of nearly 50 rental units- that I still hold- in Dubai. I'm proud of Dubai for the most part.


Investor friendly?

One thing I see today however in the market is that there is not that investor support there once was. The support that enticed us to come and invest in the first place.


Rents and Much Needed Capital Appreciation

In order for me to buy into Dubai today I have to be convinced (by Dubai) that rents will increase over time. That the government supports this growth too.

Why?

Because ultimately rents (and only rents) determine my next sale price in Dubai. If rents go down, the capital value of my investment will follow.

Lack of capital appreciation is bad, and devastating to net worth over time, particularly with a mortgage involved.

Couple this with institutions such as the Dubai Rent Committee and the media allowing a general disdain for the LandLord and I get slightly nervous.

I am not being overly sensitive here, but we were told to come and put our money into Dubai way back when, with open arms.:heart:

I feel we have been sent mixed messages - are investors wanted in Dubai or not?



Mortgage products and Banks

With the fed rate (and therefore EIBOR) rising and rents lowering, the prospect for those investors who are leveraged in the market does not look great.

Leverage is good, banks should be as supportive as possible of the investor in this regard. A mortgage is an excellent growth tool. Growing the investor of course helps to grow Dubai.

I feel the mortgage market is EXTREMELY shark like here. I've seen all the tricks at sign up, that quickly turn sour, being used. :nuts:

If Dubai really is investor friendly she needs to put a strong sense of social conscience on the lending banks today, right now, as the market begins to face the challenges of rate rises and lowering rents. This is not hard to do, they are profiteering in this area big time.


Collapsing yields

If you do get a high net yield I feel that today this is extraordinary in residential (8 percent net plus). We can manage this with a few tricks, like throwing in some furniture in our own portfolio, but let's say it is definitely outside the norm.


The effect of yield compression means as rents come down yields start to look very pedestrian in general. Any further yield compression and capital values will follow.

If rents stay steady capital values will hold at these lower (compressed) yields.

But But but but there seems to be no prospect at all (in a universal sense for Dubai) that rents, and therefore the all important capital value of your investment, will increase.


The million dollar question for me is...

Where will my growth come from over the next five years?


FX Rates Matter too-I also face a likely 20 per cent loss on my home country currency over the next few years to factor in too. Growth must be therefore 'at least' able to cover this.


Short version: More supply, lowering rents, costlier borrowing, poor mortgage market, Very bad investor sentiment & support- means poor yields and no growth prospects in Dubai medium term. Prospect of a weakening Dirham Long term too for some of us.


:cheers:

The long and short of it (in fact) is:

There is no compelling case for the very much needed 'foreign investor' to swoop in and buy your property off you at a profit in the run up to 2020.

Ask any Palm Viceroy investor what happens when predicted rental yields (used to justify a sales price) fall pathetically short.

The best thing that could happen is a government policy to kick in to actively encourage landlords, via capped lending rates (and non-neanderthal mortgage products & lending tactics) to accept lower yields.

Despite this vilification of the Landlord in Dubai by DRC and the Media, they are the BACKBONE of the economy as it expands.

Go to Dubai Reddit and ask anyone there (who make up a perfect sample of the work force in Dubai who could buy a property here) if they would consider buying.

You will get a resounding "No thank you" :eek:hno:

Dubai needs buy to let investors. Fact.

Getting such poor responses here (even when they do surface), simply confirms my argument I feel.
 

· Registered
Joined
·
125 Posts
Love you long time

There's a funny thing about Dubai

Take for example rents:

For all intents and purposes rents have collapsed.

We have seen up to 30% drops in rent in the past six months. The last two months have been particularly intense.

In many countries this would be considered tsunami-esque and newsworthy.

(This isn't a rental drop from some new overblown 'high' either. Rents collapsed in 2009, began to rise again, never quite reached the original levels properties were sold against and, now, have collapsed again. It's 'ground hog day' and a long-term investor's nightmare.)


Or, take for example sales:

A valuation done for a bank on one property we own in 2015, was 38 percent lower just two years later, in 2017.

While this presents a problem for the investor/landlord undoubtedly (let's not feel for them right now), it's also bad for Dubai inc. Lending banks can't work out criteria, and are either at serious risk or not lending, developer's forecasts go to the wall, service companies pack up, jobs are lost. All get hit.


So....

As rents continue to find their new lows, property values will follow (they have already) and investors will not only struggle to service mortgages, and get the first glimpse of potential negative equity, they will also begin to query the actual offering by Dubai inc.




Why invest in Dubai?


I mean, if you are not lightning fast and opportunistic, forget capital appreciation for one, and the rents being locked in today at new lows will take years to unwind (if you intend on sitting it out).


Back to the funny thing about Dubai..

The funny thing is, as far as I can tell, people are still buying(?), Dubai is still adding more stock to the investment pool, and newspapers aren't hitting the red alert button. Why?

The only way forward, that I can see, is ultra low lending rates, better mortgage products, in turn investors agreeing to lower yields on properties, and more effort on creating demand (or slowing delivery).


Whoever said good things come to those who wait, has not ridden the Dubai real estate cycle long enough.
 

· Registered
Joined
·
125 Posts
There's a funny thing about Dubai

Take for example rents:

For all intents and purposes rents have collapsed.

We have seen up to 30% drops in rent in the past six months. The last two months have been particularly intense.

In many countries this would be considered tsunami-esque and newsworthy.

(This isn't a rental drop from some new overblown 'high' either. Rents collapsed in 2009, began to rise again, never quite reached the original levels properties were sold against and, now, have collapsed again. It's 'ground hog day' and a long-term investor's nightmare.)


Or, take for example sales:

A valuation done for a bank on one property we own in 2015, was 38 percent lower just two years later, in 2017.

While this presents a problem for the investor/landlord undoubtedly (let's not feel for them right now), it's also bad for Dubai inc. Lending banks can't work out criteria, and are either at serious risk or not lending, developer's forecasts go to the wall, service companies pack up, jobs are lost. All get hit.


So....

As rents continue to find their new lows, property values will follow (they have already) and investors will not only struggle to service mortgages, and get the first glimpse of potential negative equity, they will also begin to query the actual offering by Dubai inc.




Why invest in Dubai?


I mean, if you are not lightning fast and opportunistic, forget capital appreciation for one, and the rents being locked in today at new lows will take years to unwind (if you intend on sitting it out).


Back to the funny thing about Dubai..

The funny thing is, as far as I can tell, people are still buying(?), Dubai is still adding more stock to the investment pool, and newspapers aren't hitting the red alert button. Why?

The only way forward, that I can see, is ultra low lending rates, better mortgage products, in turn investors agreeing to lower yields on properties, and more effort on creating demand (or slowing delivery).


Whoever said good things come to those who wait, has not ridden the Dubai real estate cycle long enough.

A bit simple and mono but then, that's how I like it:

When the demand for real estate is high, prices skyrocket. When the number of available properties increases, prices usually drop.
 

· Registered
Joined
·
125 Posts
There's a funny thing about Dubai

Take for example rents:

For all intents and purposes rents have collapsed.

We have seen up to 30% drops in rent in the past six months. The last two months have been particularly intense.

In many countries this would be considered tsunami-esque and newsworthy.

(This isn't a rental drop from some new overblown 'high' either. Rents collapsed in 2009, began to rise again, never quite reached the original levels properties were sold against and, now, have collapsed again. It's 'ground hog day' and a long-term investor's nightmare.)


Or, take for example sales:

A valuation done for a bank on one property we own in 2015, was 38 percent lower just two years later, in 2017.

While this presents a problem for the investor/landlord undoubtedly (let's not feel for them right now), it's also bad for Dubai inc. Lending banks can't work out criteria, and are either at serious risk or not lending, developer's forecasts go to the wall, service companies pack up, jobs are lost. All get hit.


So....

As rents continue to find their new lows, property values will follow (they have already) and investors will not only struggle to service mortgages, and get the first glimpse of potential negative equity, they will also begin to query the actual offering by Dubai inc.




Why invest in Dubai?


I mean, if you are not lightning fast and opportunistic, forget capital appreciation for one, and the rents being locked in today at new lows will take years to unwind (if you intend on sitting it out).


Back to the funny thing about Dubai..

The funny thing is, as far as I can tell, people are still buying(?), Dubai is still adding more stock to the investment pool, and newspapers aren't hitting the red alert button. Why?

The only way forward, that I can see, is ultra low lending rates, better mortgage products, in turn investors agreeing to lower yields on properties, and more effort on creating demand (or slowing delivery).


Whoever said good things come to those who wait, has not ridden the Dubai real estate cycle long enough.
To every single "investor" in Dubai, I highly recommend checking the Emirates Auction results weekly. The market is still falling.

Check the auction results regularly here: Auction Results

Check the listings here: Auction listings this week- Available

We have bought multiple properties via this method. The results are a good indicator of bottom line.

One thing, "isn't it in Dubai Inc's best interests if rents and prices continue to fall? Isn't a cheaper Dubai best?" An argument put to me yesterday....
 

· Registered
Joined
·
125 Posts
Taking Part in Emirates Auction to buy a property



A quick guide based on experience



Overview


Buying at auction in Dubai is simple, straight forward and very customer service orientated. Every effort is made to keep you happy, and things fair. When things DO go wrong, it is usually caused by the courts and out of Emirates Auction LLC's control.

The properties are court sanctioned, and are being sold to sell off debts of an indiviual/ company. It is a very valid service for all parties. It is the duty of the courts to get fair value, and ensure the bidding process is clean.

If you win the auction, all past service charge debts or utilities owed on the property (DEWA, Empower etc) will be cleared by the court up until the day that your title deed is produced.


Vetting the property

I highly recommend knocking on the door of a property you are interested in. Friday mornings are usually a good time. Chat with the tenant (if there is one), tell them you are thinking of buying. Ask about their tenancy contract, their intentions and any work they think is needed on the property. They are usually lovely to deal with and very happy to talk. Factor all this in to your bid.

If the property is vacant, then again, do a walk around and factor the refurb costs in from your final bid.

If the property has a tenant and rent is not going to come to you for some time, again factor it in to your bid. Easy and logical stuff here.


The bidding via Emirates Auction LLC


Opening an account at Emirates Auction is easy. This can be done online.

You will need to place a minimum 20 percent deposit into your account should you wish to take part in an auction. Sometimes we just leave a large lump sum on account.

If there is a property listed at 1 million dirhams, you will need to have a deposit in your account of at least 200,000 dirham in order to bid. This would give you the right to bid on any property listed at 1 million dirhams and under.

In the actual auction itself, you can bid as high as you like on this deposit.




Chat with the team at Emirates Auction

Go up to the auction office in Al Aweer and ask for Ibtissam or the person in charge of property. The office is shown on both Waze and Google maps. Ibtissam is friendly and very helpful.

Barge right up to the front desk and tell them you are interested in property, not cars. This will give you priority. Most of the characters in there are odd looking car dealers. No fear, they are all quite amusing to observe as you wait. Do not be intimidated.




The bidding process

Once you have placed a deposit into your account, you are free to bid online. We normally wait until the last hour before an auction ends to place a bid.

Any bid, that comes in the last 5 minutes of an auction will extend the auction by a few minutes. Remember the courts are looking to get a fair price for the property and to weed out any corruption in the bidding process. This helps.





Winning the Auction

Once you have won the auction, you will receive an sms. The property you have won, is then listed in the results section of the online auction website for ten days.

In this ten days anyone can come in and gazump you/ bid on the property you have won but they must pay a ten percent premium over your winning bid. Again this is to ensure the courts get a fair price for the property. In reality I have never seen a counter bid happen at this stage.





Beyond ten days

You will soon receive an email (within the ten day period) with a deadline to pay the balance due on the property you have won. All payments are best done by a managers cheque in the name of Emirates Auction LLC.

Be sure to pay the balance by the due date.





One month later

Approximately a month after your winning bid, you will receive a call that your title deed is ready for collection.



NB:

You must insist at the point you collect the title deed that you are given three letters from the court addressing the developer and utility companies. These letters instruct the third parties to clear all dues up to the date shown on your new title deed.

The letters are in Arabic so have someone check them for you.

The letter for DEWA you will present to DEWA, the letter for the developer, you show to the developer, and so on and so forth. We sometimes experience delays here by the court not Emirates Auction, but in the end we always get the paper work.




What to expect?

You can make significant savings buying via auction- we have seen as much as 30 to 40 percent off. Well worth the effort. Furthermore it is a fun process and exciting.

While we have experienced some 'situations' (remember the court may be being challenged on its judgements), the end result has always been EXCELLENT.




Contacts

At Emirates Auction LLC in al Aweer- walk past all dodgy car dealers, go to desk and ask for Ibtissam and Lianel (both lovely to deal with).

The current best number for the team is 0543939613, but it is best to drive up and chat with her before you get started.



Links

http://www.emiratesauction.com/en/PropertyDXB/OnlineAuction.aspx
 

· Registered
Joined
·
125 Posts
Great info @FutureViewDxb thanks, I wonder why some properties have such a long lease terms in place like until October 2022. Who signs 4-5 year rental contracts these days?
You are describing the exception not the rule. These properties on long leases likely belong to the same owner. Perhaps locked in by a company housing staff.

80 percent of properties we have bought were vacant, the balance running off a normal 12 month tenancy.

In any case factor it all in. It's pretty simple.
 

· Registered
Joined
·
125 Posts
I've been on this forum since 2004 under a bunch of different names, yes this place has gone stone cold. :dead:

In the last 14 years or so I've built up a portfolio of nearly 50 rental units- that I still hold- in Dubai. I'm proud of Dubai for the most part.


Investor friendly?

One thing I see today however in the market is that there is not that investor support there once was. The support that enticed us to come and invest in the first place.


Rents and Much Needed Capital Appreciation

In order for me to buy into Dubai today I have to be convinced (by Dubai) that rents will increase over time. That the government supports this growth too.

Why?

Because ultimately rents (and only rents) determine my next sale price in Dubai. If rents go down, the capital value of my investment will follow.

Lack of capital appreciation is bad, and devastating to net worth over time, particularly with a mortgage involved.

Couple this with institutions such as the Dubai Rent Committee and the media allowing a general disdain for the LandLord and I get slightly nervous.

I am not being overly sensitive here, but we were told to come and put our money into Dubai way back when, with open arms.:heart:

I feel we have been sent mixed messages - are investors wanted in Dubai or not?



Mortgage products and Banks

With the fed rate (and therefore EIBOR) rising and rents lowering, the prospect for those investors who are leveraged in the market does not look great.

Leverage is good, banks should be as supportive as possible of the investor in this regard. A mortgage is an excellent growth tool. Growing the investor of course helps to grow Dubai.

I feel the mortgage market is EXTREMELY shark like here. I've seen all the tricks at sign up, that quickly turn sour, being used. :nuts:

If Dubai really is investor friendly she needs to put a strong sense of social conscience on the lending banks today, right now, as the market begins to face the challenges of rate rises and lowering rents. This is not hard to do, they are profiteering in this area big time.


Collapsing yields

If you do get a high net yield I feel that today this is extraordinary in residential (8 percent net plus). We can manage this with a few tricks, like throwing in some furniture in our own portfolio, but let's say it is definitely outside the norm.


The effect of yield compression means as rents come down yields start to look very pedestrian in general. Any further yield compression and capital values will follow.

If rents stay steady capital values will hold at these lower (compressed) yields.

But But but but there seems to be no prospect at all (in a universal sense for Dubai) that rents, and therefore the all important capital value of your investment, will increase.


The million dollar question for me is...

Where will my growth come from over the next five years?


FX Rates Matter too-I also face a likely 20 per cent loss on my home country currency over the next few years to factor in too. Growth must be therefore 'at least' able to cover this.


Short version: More supply, lowering rents, costlier borrowing, poor mortgage market, Very bad investor sentiment & support- means poor yields and no growth prospects in Dubai medium term. Prospect of a weakening Dirham Long term too for some of us.


:cheers:

Things have become much worse since writing the above, tough times continue.

"British airline Virgin Atlantic announced on Thursday it will end flights between London and Dubai. Virgin said the route was no longer economically viable. Dubai is facing a sharp recession al-Quds al-Araby reported."

Virgin Atlantic pulling out in 2019, the 12 month run up to Expo 2020. Alarm bells?
 

· Registered
Joined
·
125 Posts

· Registered
Joined
·
125 Posts
Oversupply & what it means to you

Oversupply and your money

From this recent article, it appears to be sanctioned that so long as developers continue to want to build, they can. Dubai inc. will not hold them back.

Sooooooo even if a developer:

1) Sees an established market rate for say, studio apartments, then 2) decides to flood that market sector with more of the same (hello Azzizi), and 3) By doing so drops the market value, unilaterally, by 40%, all is good according to Dubai Inc.

But I really don't think it is.

Developers can and do get it wrong. Moreover developers can cause damage before going bust themselves.

How it affects Dubai Inc.

By diluting the market so much property values have crashed and banks have become exposed.

A decent mortgage market cannot form.

Dubai'a reputation as an investment case is toast. No one is genuinely making the argument to buy.


How it affects the end user

How can any end user commit to a mortgage having seen the market swing so dramatically? A property sold for "X" and dropping by 35% in the last 24 months is devastating to an individual, salaried investor. This drop will likely have pushed them into negative equity. These are the real individual investors that work in offices, consume stuff, order food, go to the cinema, make Dubai happen.

Should the end user have foreseen the oversupply? Should they have been aware that some developers do get it wrong and can threaten their little investment. Should the investor be aware that some developers may need to launder their cash through building projects regardless of market conditions?



The future -How do you even sell Dubai to an investor?

What is the actual investment case today for an investor in Dubai?

Can you sell the investment case based on precedent and the past? nope.

Can you sell the investment case based on scarcity? nope.


Think about it...

You may sit in a villa today thinking AED 2 million is it's value and it cannot fall further, but your villa, and your community, can be repeated again and again and again.

In fact if you do see any form of capital appreciation on your villa be prepared to see that cycled back down to zero again (or worse), as developers capitalize on the price increase by building and (as has happened today) oversupplying the entire market in the process.

There is no case that this pattern will end, and there is no case for appreciation of capital in any real, solid, long term sense in Dubai.
 

· Registered
Joined
·
125 Posts
2020-2022 bottom of the cycle?

Recent mainstream press

"Chestertons MENA said the ‘downward correction’ in Dubai’s real estate market will “continue over the next few years” source


“Without a significant decline in construction activity, a boost in population and short-term economic stimulus, it is unlikely the residential market will have any respite....in the next 3-5 years, due to the forecasted property pipeline” source

Then the downright crazy press

"Entire GCC Crumbles Like A Pack of Cards: 19 Banks Merge, Etihad Can't Pay Back Debt, Saudi Contractor Can't Pay Salaries, UAE/Saudi Halt 3 Projects of $243 Billion, $11 Billion Bail Out For Bahrain & Jordan" source
 

· Registered
Joined
·
125 Posts
2019

Keeping an eye on Property Auction Results 'Click here' indicates prices are still falling.

The falls in value have gone far beyond my worst estimates in fact, and sadly are putting some borrowers in negative equity.

There in the auction results, at the time of writing this post, is a one bedroom apartment that sold for 480k. This same apartment would have sold at 750k+ two years ago.

Which begs the question...

"When is a 40 percent decline in prices not newsworthy? has everyone simply given up, do they no longer care?"

Again, I sincerely feel the supply side should be managed by Dubai inc. I do not feel developers should be left unrestricted.

If I were in the habit of begging, my plea to Marwan and the 'powers that be' would look something like this:

Stabilise the market urgently, 'time lock' planned developments and sites for 10, 20 and 30 years) so you can access their paper value without disrupting the current market. Use those sites as parks and open spaces in the meantime.

All I see ahead is a totally unstable investment case in Dubai inc, where it is clear any commitment made can be undermined over and over again.

It isn't hard to understand this. Are you considering your options fellow investors? Do you have expectations for next year?
 

· Registered
Joined
·
125 Posts
Is there a need for a supply cap in Dubai’s real estate market? Recent Gulf News article.


Dubai/UAE plays to every investors biggest concern when they do not control supply, and create visible economic moats in real estate.

There is unlimited land so we know it is possible to flood the market indefinitely, for eternity. This is exactly why many of my contemporaries see no investment case for Dubai. The fact is even when you do see rises in the market in Dubai it triggers a messy start to a state of oversupply (and an eventual market collapse as we are in today).

Instead, why not send out messages to the investment community to counter this concern? Create lock ins on massive swathes of land areas and allow the market to rise. Control how and when the land is released.

Let the investor know how this will unfold too, so he/she doesn't feel tricked.

You see investors here, on this forum, mentioning that they bought properties that were renting for 330,000 aed per year that have since dropped to 120,000 aed per year. This drop in income will have more than halved their asset value, wreaked havoc with their net worth, and massively compromised the quality of their retirement, their lifestyle or any number of things.

This entire market is about supply and demand and it needs to be taken much more seriously. Investors put a lot of faith in the management.
 

· Registered
Joined
·
125 Posts
Is there a need for a supply cap in Dubai’s real estate market? Recent Gulf News article.


Dubai/UAE plays to every investors biggest concern when they do not control supply, and create visible economic moats in real estate.

There is unlimited land so we know it is possible to flood the market indefinitely, for eternity. This is exactly why many of my contemporaries see no investment case for Dubai. The fact is even when you do see rises in the market in Dubai it triggers a messy start to a state of oversupply (and an eventual market collapse as we are in today).

Instead, why not send out messages to the investment community to counter this concern? Create lock ins on massive swathes of land areas and allow the market to rise. Control how and when the land is released.

Let the investor know how this will unfold too, so he/she doesn't feel tricked.

You see investors here, on this forum, mentioning that they bought properties that were renting for 330,000 aed per year that have since dropped to 120,000 aed per year. This drop in income will have more than halved their asset value, wreaked havoc with their net worth, and massively compromised the quality of their retirement, their lifestyle or any number of things.

This entire market is about supply and demand and it needs to be taken much more seriously. Investors put a lot of faith in the management.

Prices are continuing to fall - auction results show it clear as day- build Visible Economic Moats , plan supply, let the investor know.

The consistent winners - DEWA, Empower, Emicool, basically Dubai Inc. are all in the family, leaving the many developers and investors (heavily encouraged into the market), to fend for themselves. Not a long term strategy.
 

· Registered
Joined
·
125 Posts
It seems all doom and gloom at the moment. Do we even see prices rising over the next decade in Dubai or are a lot of the investors stuck with their money tied up with no chance of capital appreciation and lack of buyers on the secondary market.
There are no "economic moats" in the UAE, in fact Dubai/UAE can build indefinitely.

In the future any price rises, will be temporary only because of the lack of supply control (and measures intended to increase demand failing).

So the cycle goes......property prices rise and developers vomit up a dizzying array of projects that eventually complete and flood the market.

This new stock not only removes the modest price rises that triggered the building frenzy in the first place, but takes the entire market to a new lower level over a 5 year (ish) term.

Worth noting that as the value collapses on your investment, the commitments the asset must meet to Municipality, DEWA and the various cooling companies is unchanged.

You are being forced to either trade and time the property market like a cheap stock market listing, or accept that your wealth is going to slowly erode over the medium to long term.

Do you see any genuine cases for substantial increased demand in the future? There is none. Yet the supply side keeps coming. It is very simple really.
 

· Registered
Joined
·
125 Posts
This.

Developers would go out of business pretty quickly if they weren't able to find clients to sign up and buy off plan. With so many complete and vacant units it makes no sense at all to risk buying off plan when they could start getting a return straight away on completed units. Flipping season has been over for years. I would love to know who is buying off plan and keeping the developers afloat. Unless, as I said previously, the Government is planning to ramp up the population and relax visa/residency rules post Dubai 2020, which might explain the huge over supply of units.
Developers do go bust all the time in Dubai. Long, drawn out busts that leave investors with false hope well after the death bell could have been whacked hard.

The problem is the lack of ECONOMIC MOATS in Dubai to sustain any price rises. If your asset rises, a multitude of developers will pile in to build, unrestricted, and in time, massively oversupply the market, sinking you below your original pricing.

The idea that the Government has suddenly decided to massively boost the population and create the demand needed, is false. There is a constant push for population growth at Dubai level, with targets set and missed since the early 2000's. This has at times been met with resistance at the UAE level. Nothing new. PR re "the Chinese are coming" is not new either.

Economic moats. Economic moats. Economic moats.
 

· Registered
Joined
·
125 Posts
When a property falls in value, or rents dramatically reduce, nothing really motivates the powers that be to do anything about it. That's a big problem for little foreign investors like us.

Try explaining your rents no longer cover mortgages, or you have to downgrade your kids schools, or you are in negative equity- who cares? no one.

Dubai linked companies like Dewa, Empower, Du & Etisalat still collect, and cheaper rents mean the tertiary Emirates take the hit on seeing actual vacant properties for now.

Even worse, as a tenant (I am one), I must admit I love a cheaper Dubai, and I love feeling like I get value for my money.

But....As an investor, Dubai property is in a constant cycle that has (and will) take any investment made indefinitely to new lower levels, it's a fact. I also believe a cheaper Dubai is inevitable.

It's not a sinister thing, Dubai is not plotting against you I don't think. Dubai will build because that creates her jobs and her population. People will invest because they don't recognise the cycle or they plan to time it, or need to launder some cash, or "just love the views, baby!".


There will be dozens of Al Bararis, by the time it's all done. No economic moats.
 

· Registered
Joined
·
125 Posts
What you say is true. However, IMO, i believe this is an intentional and concerted effort by the authorities to bring rent values and therefore cost of living down in the emirate which is still in the top 20 most expensive cities to rent. Unfortunately, this is at the expense of the short to mid term investor.

https://www.businessinsider.com/mos...he-world-to-rent-a-2-bedroom-apartment-2017-5
When prices/rents of property started picking up in Dubai (post the 2008 crash), the upward momentum allowed a lot of off plan projects to be launched. These off plan projects are now being delivered, and causing massive oversupply. It is really that simple.

And while this is creating devastating losses to investors (and I'm trying not to be dramatic) I don't think it was planned by Dubai Inc. They aren't that sophisticated and it would be too complex.

I think the problem is that there isn't any downside to your property being worth less to Dubai inc. A cheaper Dubai, at the investor's expense, is still a cheaper more attractive place to come to for tourists and people setting up shop. Dubai still gets the Dewa connection, Dubai wins.

The unrestricted building means Dubai will cycle up a little and then down again indefinitely.

There are no Economic moats in the UAE, and they have failed to create overwhelming demand, which I truly believe was their plan or justification for a 'free for all' building policy.

Will you celebrate a price rise in the next few years? yes, very likely, but it will only be a matter of time for a wipeout again. There is a clear cycle.
 

· Registered
Joined
·
125 Posts
When prices/rents of property started picking up in Dubai (post the 2008 crash), the upward momentum allowed a lot of off plan projects to be launched. These off plan projects are now being delivered, and causing massive oversupply. It is really that simple.

And while this is creating devastating losses to investors (and I'm trying not to be dramatic) I don't think it was planned by Dubai Inc. They aren't that sophisticated and it would be too complex.

I think the problem is that there isn't any downside to your property being worth less to Dubai inc. A cheaper Dubai, at the investor's expense, is still a cheaper more attractive place to come to for tourists and people setting up shop. Dubai still gets the Dewa connection, Dubai wins.

The unrestricted building means Dubai will cycle up a little and then down again indefinitely.

There are no Economic moats in the UAE, and they have failed to create overwhelming demand, which I truly believe was their plan or justification for a 'free for all' building policy.

Will you celebrate a price rise in the next few years? yes, very likely, but it will only be a matter of time for a wipeout again. There is a clear cycle.

Again, I don't think there's anything sinister going on, nor do i believe there's a plan to reduce rents and property values.

Weaker demand, less population growth than expected against massive oversupply and here we are.

A few years ago everyone was worried the hotels would not cope with the amount of people coming for 2020. They even brought in Airbnb regulation to accomodate this expected tidal wave of footfall to Dubai. Recent press talks about a "hotel supply glut" so clearly the masses have not come.

I think if there was just some tie in where Dubai inc needed to sustain property values, and rents, where it would hurt them when prices fall...... then the investor could at least be assured that their asset will not be eternally diluted. Timed release of land for development etc. things like that. Measures that could not be broken opportunistically when there is a mini wave of bullishness in the market.

Alas there is none. Your property goes up in value, expect oversupply in a 5 year cycle.

Maybe this could be fixed with a few million middle class Chinese moving to Dubai, that'd help.... Casino's anyone?
 
1 - 20 of 128 Posts
Top