[Tokodo]

Hello all,

Through researching the internet, I have found this great and very useful forum, while looking for advice on buying a property in Dubai. We are currently very confused by the amount of offers we are receiving. Let me explain first.

My wife and I are German and Dutch nationals, who have lived many years in the UK and other countries before that. We moved back to Germany in 2019. During a wonderful holiday in Dubai last November, we started looking at the possibility of buying a property there, to spend the winter months. We visited Nakheel, Emaar and Damac offices who all offered both off-plan an already built properties. We also visited three real estate agents. They were very helpful and showed us a wide range of existing properties for sale in the Marina area, on Palm Jumeirah, The Creek, Arabian Ranch and Sports City.

Wanting to evaluate all we had seen, we traveled back to Germany. During December and January, we received some emails and calls from Dubai, trying to convince us that we shouldn’t wait any longer because Expo 2020 would send prices through the roof. Having lived in multiple countries, we know the sales push tactics of real estate agents, so we told them all that we were still considering all options. Things went more quiet then with the calls and emails.

But since the end of March, we are being flooded with emails and calls in unprecedented numbers and all with prices that just go lower and lower. Every time we inform the agents that we are not very interested, they come back a week later with even lower prices. The strange thing is that the price reductions of off-plan and already built properties seem to be lowered with about the same percentages. But after reading through a lot of posts here, we have already decided not to buy off-plan.

Nevertheless the enormous price reductions continue, in some cases such as an already built villa in Arabian Ranches, with as much as 40% since November. But also apartments in well developed areas such as The Marina, are being offered at sometimes 30% lower prices since November. Also almost
pre-approved (part) financing is thrown into the deal, especially through the big developers and their partner banks. Whenever we inform any agent that we are still considering multiple options, they come back with lower prices a few days later.

Is this the same panic starting to develop as in 2009? To be honest the enormous price drops are putting us of all together for now. For us it’s a long term purchase for personal use only, so no intention to rent it out. But we are afraid that even buying at these huge discounts would be a risk. Even though the agents keep pushing the same sales pitch that prices will now skyrocket during and after Expo 2021.

Having looked around all over Dubai and experiencing these almost desperate sales agents, we fear that the combination of more off-plan oversupply, rapidly growing number of already existing empty properties, low oil prices and worldwide economic problems caused by Covid19, will blend together again in a very toxic mix for Dubai. Therefore we are looking for advice on this forum. There seem to be a lot of members here that have lived through all ups and downs in Dubai over the years and who might be able to offer much needed advice.

Thank you very much in advance for your help!

 

[Tokodo]

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The per square foot prices for ready properties are significantly less than off-plan. The supply pipeline pace has slowed down and currently no new launches due to the crisis. All positive for the market balance. Remains to be seen if the easing of restrictions will gradually improve the demand side, economic activity and sentiment. Prices may decline from here but I think the downside is limited and the upside potential is good if you are looking at a 5+ years horizon, regardless of expo. Yes, sales agents are desperate, it's because transactions are down as the market tries to find a new balance.

Thank you so much for your insight! It does seem that agents are desperate. In the exchanges with them, they try very hard to make us believe that there are many distressed sellers now, who prefer to sell as quickly as possible at big discounts. The agents often tell stories of big layoffs of expats, especially those working in specific industries such as finance, hospitality, airlines and tourism. They seem to be using this as a sales tactic. For us it’s difficult to picture the situation really worsening in Dubai. It seems to be such an extremely wealthy place. We watched many expats in our hotel bar and in the hotel gardens, having parties with expensive bottles of champagne flowing like rivers and lobsters and caviar being served in huge quantities. Many of them arriving in luxury cars. Their great wealth seems very obvious. Or is it all more an illusion of wealth based on irresponsible spending and debt?

 

[Tokodo]

The replies and posts here by experienced people are very helpful. We just received the Arabian Ranches Villa offer again and all of a sudden 11 other offers for similar properties in Arabian Ranches. No more extra discounts offered. Generally 40% lower than the prices we were offered in November and December. Some owners though do now offer to pay for interior refurbishments or landscaping on top of the discounts, should we not like the designs. We do get the feeling it’s a bit of a Wild Wild West property market in Dubai.

We will really take all advice to heart in considering a purchase in Dubai. For now we won’t make any decisions, since it currently all seems to be a bit chaotic. I agree with some of the recent posts that these agents/brokers do more harm than good with their behaviour. As an interested buyer, they give you the feeling that it’s all a mess of oversupply and sellers that need to dump their properties at any price.

 

[Tokodo]

Thank you all for you invaluable information. We have decided to wait it out for now. Using Google News searches, I have been reading up on the property market in Dubai and the general economic situation. I never realised that so much of the real estate developers, the Dubai government and many expats living there, are so heavily indebted. Also the stories of the exodus of workers/owners in all sorts of industries and businesses feels very troubling.

I remember well these images of abandoned luxury cars at the airport about ten years ago. After a few days of reading up on Dubai, I start to feel that this might happen all over again. The agents keep calling us, with bigger and bigger discounts offered in all Dubai areas and from small apartments to high end villa’s. These agents and brokers become more pushy and seem to be doing more damage than good for their market. I have also been reading a lot on this forum and was surprised by how many buyers mention a lack of regulation and problems with governmental organisations, such as RERA. For a country that is so reliant on real estate a little more regulation and protection of buyers might be something to consider.

 

[Tokodo]

In my opinion it's good to keep an open mind when investing. Between 2009-2014 prices recovered to pre-GFC peaks. Past performance doesn't guarantee future results. But you have to weigh your risk to reward ratio. The infrastructure is still world class and development hasn't stopped. The lifestyle attraction and relative safety is still there. With economic stimulus and job creation the viability should return.

One of the things that we were very impressed with, was the infrastructure in the Emirate. Brand new roads and a beautiful metro system that we truly enjoyed. Still relatively small compared to for example Singapore and Hong Kong, but when we were in Dubai we watched an interview with the ruler of the country in which he stated that Dubai as a total and also it’s metro system presently, are only just about 10% of his total vision for Dubai. So only imagine what it will be like when his vision is all completed. It will be like nothing else in the world.

What was a little worrying with some of the properties we visited though, was the overall building quality. Especially on Palm Jumeirah and Arabian Ranches. Maybe it’s just because of the minuscule number of properties we visited compared to the vast number of de developments in the country. We might have just stumbled upon a few bad examples which would give us a distorted view. Nevertheless some instances were not too good. Cracks appearing in outer walls, terraces that were wobbly, leaky pools, paint layers loosening both outside and inside and not too great quality of interior finishing such as kitchens, bathroom, floors, ceiling etcetera. These properties showed signs of rapid ageing even though they were relatively new. The agents stated that these were minor issues which would all be fully repaired by the developers under warranty, but we wondered why they hadden’t already done that earlier. It would make things easier to sell when everything looks top quality and up to international building standards.

 

[Tokodo]

Just an eye opener why one should never find themselves in unmanageable debt in the UAE

Be careful and always know when in doubt always know the way out.

Working for Emirates Airlines could mean arrest, imprisonment and Interpol warrants | eTurboNews | eTN

Like any airline in the world, COVID-19 is putting airline operations on the edge. Emirates had been leading in innovative solutions to make the carrier

www.eturbonews.com

Not knowing what I would read, I clicked on the link. What terrible and horrible story! I never realised that Dubai did not have any decent modern laws to protect it’s residents who end up in bankruptcy during a crisis. What will happen to the many Emirates pilots who lose their jobs and who live in Dubai, often with mortgages, car financing and credit card debts?

 

[Tokodo]

Even though we decided to not pursue a property in Dubai for now, we still get offers from agents who keep contacting us. I have already mentioned the bigger and bigger discounts they offer. Nevertheless one proposal that we received yesterday is worth mentioning here. A property agent of an agency that had not contacted us before, offered a “unique” opportunity. If we sign up now and pay a fee, we will be among the first who will be able to select and purchase a waterfront villa at a exclusively discounted price in a big project on Palm Jebel Ali.

We have visited the beachfront hotel nearby the empty project during our stay in Dubai last year. There was no infrastructure an no work going on. This must be a scam, since the entire Palm Jebel Ali looked completely deserted when we were there.

 

[Tokodo]

It just took one twisted developer, and a poorly regulated real estate sector to break my aplomb towards that market into match sticks. I still did good off loading other property before the end of 2014 because it was evident to me what was coming.

I'm happy to hear your happy ending with your Rolex. Unfortunately one developer swindled me that I could have bought 20 Rolexs. Neither do I have keys to an apartment nor did I get a refund.

At the center of the spiders web there they seem to always know the cost of absolutely everything but never the value of anything.

What's coming will make 2009 seem like a walk in the park so be careful people.

For us it’s still difficult to picture the situation really worsening in Dubai. It seems to be such an extremely wealthy place! When we were in Dubai we watched an interview with the ruler of the country in which he stated that Dubai presently, is only just about 10% of his total vision for the country. So only imagine what it will be like when his vision is all completed. It will be like nothing else in the world.

We also watched so many expats in our hotel bar and in the hotel gardens, having parties with expensive bottles of champagne, flowing like rivers and lobsters and caviar being served in big quantities. Many of them arriving in beautiful luxury cars. Their great wealth seemed very obvious. Or is it all more an illusion of wealth based on irresponsible spending and debt?

 

[Tokodo]

We decided not to pursue a property in Dubai after receiving a lot of very useful advice here. The lack of regulation, often bad building quality, realtors who seem more like property cowboys than real estate professionals and the shady property developer dealings have put us off all together. We always thought Dubai had a well regulated property market that offers building quality up to the highest international standards and world class regulatory institutions for the legal protection of property owners. It seems we were very wrong. Especially after reading the terrible ordeals people ended up in with RERA and the hefty sudden rises in service charges.

We still get offers from agents. With the discounts being bigger and bigger with every annoying and pushy call. The villa we looked at in Arabian Ranches last year is now being offered for 47% less. Nevertheless one proposal that we received yesterday for the second time is worth highlighting. An agency offered a “unique” opportunity. If we sign up now and pay a fee, we will be among the first who will be able to select and purchase a waterfront villa at a exclusively discounted price in a big project on Palm Jebel Ali. Handover in 2024.

We have visited the nearby beachfront hotel during our stay in Dubai last year. There was no infrastructure and no work going on at Palm Jebel Ali. Just an empty massive land reclamation project. This must be a scam, since the entire project looked completely deserted when we were there. It has been lying there for over 10 years now, while nothing has happened.

What we find most shocking is that the government of Dubai does not seem to aspire to structural changes that could improve the reputation of the real estate sector. It’s such an important industry for the country. But with its reputation getting worse and worse, Dubai really seems to be damaging it’s own economy.

 

[Tokodo]

I wonder if it's even a realistic option at this point. It could be that business is so bad at the moment that the shock of any major changes would push several big players over the edge into bankruptcy. One could see the arguments, or what: "We can't afford to introduce more regulation at this point." "This would make it too hard for us to sell our stock of unsold apartments, and then we wouldn't survive until next year." "We don't have the money to implement such wide-ranging reforms in this economy!" If developers are struggling in the short term, changes that would make things more difficult now might not be in their interest, even if they would make things better in the long term. And if that sort of disruption damages the real estate sector, it would also affect the construction sector, at which point so much money is in play that the banks are in danger, and by then a sizable portion of Dubai's economy would be at stake. So they let the cowboys continue, because they pull in sorely needed money in the short term to keep the charade up for another year, all while a negative feedback loop is slowly draining revenue from the system.

Of course, this is a very pessimistic outlook. It could just be down to the cowboy developers having too much influence and making too much money for them to want to change things. But given how real estate prices are developing, I don't think everything is working as intended at the moment.

What surprises me most is that the government apparently hasn’t learned very much from the previous Dubai property collapse in 2009. Now it’s crashing all over again, with multiple projects just lying empty in the sea. Look at Palm Jebel Ali, Waterfront, The World. Billions of USD waisted on projects that after 10 years, are still dead as a dodo. The one palm project they managed to finish, Palm Jumeirah, is vastly overcrowded with too many properties on it, causing structural damage because this land reclamation project was never intended to carry so much weight. The shoddy building quality doesn’t help either. We visited multiple properties on Palm Jumeirah and were shocked by the state of them. Cracks, roof leaks, paint coming off, internal plumbing leaks, leaking pools. These houses looked so much older than their real age.

Dubai hasn’t implemented serious and structural changes in their property laws over the last 10 years. The government could have used that time to make Dubai a safe and welcoming place for property investment, yet it seems to have become even more of a financial mess, with ever growing risks for buyers. Currently more and more construction projects are being halted or cancelled. It feels like 2009 all over again.

You get the idea that the government of Dubai doesn’t want to know the real state of the property industry. But given the fact that it all came crashing down in 2009, it might be wise for the government to implement serious changes now. Should tens of thousands of buyers lose big sums of money again, as in the 2009 Dubai crash, the country might never be able to restore its reputation. It was a global Dubai PR disaster ten years ago. News reports all over the world with stories of people often losing their life savings. Especially the German, UK and Dutch newspapers then, were filled with these very damaging stories.

Furthermore, Dubai can’t expect their neighbours to bail them out again. That would really be too humiliating, since they already took so much of their neighbours money in 2009. They can’t donate their highest sky scraper to Abu Dhabi this time, because they already did this ten years ago. From what I understand from recent news reports, Dubai hasn’t even paid off these debts from the last property crisis. They just keep searching for ways to restructure these debts, rather than paying them. The recent financial turmoil with the NMC healthcare company and UAE Exchange shows that bad governance is not only a serious problem in real estate but across multiple industries. The fact that the only UAE company listed in London, collapsed because of multi billion USD fraud, doesn’t paint a very reassuring picture of overall Dubai governance standards.

 

[Tokodo]

After reading this I suddenly understand why they keep calling us to sell:


Emaar, Dubai's biggest listed property company, posted a 35% drop in first half net profit, hit by the economic slowdown triggered by the coronavirus pandemic, which further dented the emirate's property market.

Net profit fell to 2.01 billion dirhams ($547 million) for the six months to June 30 from 3.11 billion a year earlier.

Revenue fell 22% to 9.03 billion dirhams.

Dubai homebuilders face further weakening of the property market as job losses and salary cuts curb local buyer demand for new properties and travel restrictions reduce international demand, rating agency Moody's said last month.

Emaar is behind many of Dubai's major developments, including mega shopping centre Dubai Mall and the surrounding residential area.

It is 29.2% owned by state investment fund Investment Corporation of Dubai.

 

[Tokodo]

Not trying to put a positive spin on it but H1 2019 - 3.11B net profit and H1 2020 - 2.01B net profit is great performance given that many local and international business are either in loss or out of business in H1 2020

I agree! They are still making a profit and that is definitely an achievement. This week we started to receive calls from a Dubai property developer that we had never even heard of before. They are called Kleindienst Group and they wanted to sell us “Floating Seahorses”. It’s some sort of boathouse with an underwater room and a deck with jacuzzi. The salesman guaranteed a yearly 16% return. Which seems a little steep.

 

[Tokodo]

Is that true? If so, why are they continuing to build there?

They are indeed continueing to build there, but from what we saw during our visit last year, construction seems to be focused on the few remaining empty sections where the property density is significantly lower and where the terrain has had many more years to settle properly. Most of the other areas carry much more villa’s than the original plans presented to prospective buyers in the early 2000’s.

The Dutch company Van Oord, who created the island, stated after they studied the redesign with many more properties added, that their surface weight distribution calculations were not made with that many properties on Palm Jumeirah. Therefore they withdrew most of their contractual warranties. Nakheel started legal proceedings, but lost because Van Oord had made provisions in their contracts to cover overbuilding by Nakheel and the subsequent liabilities. Shortly after that Van Oord left Dubai all together, because they hadn’t been paid for over a year.

We visited multiple properties for sale on Palm Jumeirah and noticed the problems in the areas with the highest density. Cracks in driveways, walls, floors and ceilings. Leaks in swimming pools and plumbing issues due to cracked connections in underground pipes. Even the intensive vibro compaction hadn’t been able to tackle the problem. In some of the cases, the owners took legal action against Nakheel and after a lot of hassle, repairs were carried out, but those turned out to be more cosmetic touching up than structural improvements and are still clearly visible for the trained eye.

A British lady who later sought media attention in Europe for what had happened to the property she bought off plan on Palm Jumeirah, demonstrated it all in the best and easiest way possible. On BBC News back then, she explained that she bought a freestanding villa with a lush garden and ample space surrounding her dream property. The reality now was, that she and her neighbour could open their kitchen windows and pass an egg, not even throwing it, without having to leave their house.

 

[Tokodo]

Do you have any links to this statement?

Except of course, they've had vessels operating in Dubai ever since, and are currently doing the Dubai Harbour project. In fact, in the Press Release for the Dubai Harbour project, they stated: "Van Oord has been working virtually non-stop in Dubai since 2001."

Not only that, they continued to work for Nakheel on Palm Jumeirah: Award for beach profiling work Palm Jumeirah

The statement was big news in Dutch media after Dubai collapsed and Dubai World defaulted on loans. It was around the time when Abu Dhabi stepped in to save Dubai and the Burj Dubai was renamed to Burj Khalifa. The statement became public in The Netherlands after the court testimonies from Van Oord executives at the time of the lawsuit that Nakheel filed in The Netherlands against Van Oord. These should still be available to see in the public court records in The Netherlands. For some reason most of this lawsuit never reached the Dubai press.

Van Oord did indeed return to Dubai after they left. Hence the very clever wording “virtually non-stop” in their press release. But the return was under changed conditions. The Dutch government guaranteed 50% payment of contracts in Dubai through a Dutch export guarantee program. The other 50% had to be prepaid by Dubai before any Dutch company would start working there again. This program was initiated to assist companies such as Van Oord during the economic aftershocks of the financial crisis. This was a great help for Dutch companies. Many of them were left in financial limbo when Dubai collapsed and Dubai World, Nakheel and other Dubai entities hadn’t payed their bills for an extended period. The Dutch press revealed that the Dubai government initially did not like this arrangement at all and refused to agree. But they eventually did after the Belgian land reclamation company Jan de Nul Group also left Dubai, due to non payment of multiple instalments for the Palm Jebel Ali project. They also returned to Dubai under a similar guarantee program initiated by the Belgium government.

In the end it was a good solution, since Dubai turned out to be much less creditworthy than anybody would have ever expected based on the seemingly endless wealth of the country. Nevertheless companies could only take on smaller projects, since there was a limit to the sums that the Dutch and Belgian governments would guarantee. Therefore The Universe
and The Palm Deira projects never came off the ground, since it was considered too much of a risk to guarantee by both the Dutch and Belgium government. Nobody at that time knew if Abu Dhabi would bail out Dubai completely. I think the donation of Burj Dubai to Abu Dhabi was the first signal that Dubai would be rescued by its big brother and that Dubai would start paying it’s bills again.

Let’s hope that Dubai companies learned from the near collapse of the country. Although some news reports about the financial soundness of Nakheel are slightly worrying. Such as this recent article:

Dubai's Nakheel in talks to refinance debt: Sources - ET RealEstate

State-owned Nakheel, developer of Dubai's palm-shaped islands, was forced into a massive debt restructuring in the aftermath of the emirate's 2009-2010 real estate crash, when the company was one of the hardest hit.

realty.economictimes.indiatimes.com

Is it starting to happen al over again?

 

[Tokodo]

For now the financial strength of Dubai and it’s property developers doesn’t look to good, judging from the world media:

Subscribe to read | Financial Times

News, analysis and comment from the Financial Times, the worldʼs leading global business publication

www.ft.com

Damac Properties' losses widen to Dh387m in first-half 2020

Dubai developers have struggled through the pandemic-hit period

gulfnews.com

http://tradearabia.com/touch/article/CONS/370166

Dubai's Nakheel in talks to refinance debt: Sources - ET RealEstate

State-owned Nakheel, developer of Dubai's palm-shaped islands, was forced into a massive debt restructuring in the aftermath of the emirate's 2009-2010 real estate crash, when the company was one of the hardest hit.

realty.economictimes.indiatimes.com

 

[Tokodo]

Well yeah, obviously. Wouldn't be surprised to see Damac go bust actually. Emaar is too big to fail (will always be bailed out by the gov), but Damac is fragile and in a very bad spot currently.

Have Dubai governmental guarantees improved over the last years? Would off-plan buyers at Damac, who already paid instalments, receive their money back? I remember from the last collapse of Dubai during the financial crisis, that many buyers lost vast sums of money or that they were offered lesser properties at inferior projects. Currently the number of partly finished projects that are “On Hold”, seems to be rising. Is there any form of governmental guarantee fund that ensures that these projects will be finished? Or is it just bad luck when another developer goes into bankruptcy?

 

[Tokodo]

Recently I have same discussions in one Italians facebook group in UAE. In this group 99% of people speak bad and negative about Dubai but NO ONE want to leave UAE and go back in they country.
[/QUOTE]

Just a general thought. Judging from the many bad experiences, scattered throughout the majority of threads on this Dubai property investment forum, one could also come to the careful conclusion that there is in fact an awful lot wrong with the Dubai property industry and that many people lost hard earned money because of the lack of regulation, consumer protection and a surplus of greedy untrustworthy sales agents. Again, it’s just a general thought.

 

[Tokodo]

Dubai will come back as its the fundamentals are all good - its a connection hub of the region and will remain so until an alternative can come about. The retirement visa will bring a new community of people to come and live in UAE - these are the middle class rich folks who can invest in buying a place for 2 million.
Next should be the introduction of PR which is the game change in property that everyone has been waiting for.

The introduction of PR campagnes can be very helpful to improve a negative image, but as with any PR effort there is a limit to how much PR can improve the image of the actual real life situation. Investment in Dubai PR campagnes can’t solve the lack of consumer protection regulation, lack of building quality standards, lack of moral standards at many sales offices, lack of due diligence before building projects are awarded to building contractors who then disappear into the night, creating yet more unfinished projects and idle standing construction cranes.

We have loved every visit we made to Dubai. We even thought very seriously about buying a property there. But once you start the proces of reading other people’s experiences and engaging in contacting developers and real estate agents, you enter a mostly unregulated no mans land, where turning a quick profit seems to prevail instead of building a long lasting relationship with clients.

Dubai laws regarding property development, construction quality control, consumer protection, property sales and property aftersales, need a complete overhaul. When people outside Dubai start telling their family, friends, colleagues and others at meetings, social gatherings and on social media, that Dubai is the safest possible place to invest your savings in properties, a place where a deal is a deal, a place where promises and agreed timeframes are kept, a place where building and regulatory quality is key and where the government guards your rights to the highest international legal standards, then Dubai has the cheapest and best PR campaign it can get. Word of mouth will always beat the biggest army of clever PR executives. Yes, investment in PR can be of enormous use, but can never turn a Skoda into a BMW. No matter how many millions you throw at it. It’s still a Skoda, but now with a shiny paper brochure, exotic commercials and glossy website.

 

[Tokodo]

With apologies to Skoda owners. The brand was only used as a metaphorical illustration.

 

[Tokodo]

There are also some amazing initiatives in Dubai, that create truly great PR. Public Relations that is, not Permanent Residency. It‘s a great project, the first of its kind in the region, which is aimed at establishing Dubai as one of the world’s cities with the best air quality by 2021. It started in 2017 and will be finished next year. Costing a total of Dh500 million.

In a few months time, Dubai residents will be breathing the best air quality through an intricate system of monitoring and new laws, that have been implemented in the last years. It’s exactly one of those initiatives that is badly needed and that the Dubai government should use much more actively in it’s PR strategy.

When the project is finished next year and Dubai has one of the best air quality measurements in the world, it will be great advertising material. CNN shows air pollution maps on its channel multiple times a day. For the last few years it mostly showed air quality to be quite bad in Dubai, but this initiative is a real game changer. It could convince people to buy property in Dubai. Sustainability and excellent air quality are what people look for nowadays when selecting an environmentally safe place to live or reside for their families and children.

Dh500m projects to make Dubai’s air quality the best

Dubai Municipality devises five-year air quality strategy

gulfnews.com