Eeyore

You've made this comment several times in related threads. Since it's usually only ever people who own property out here who say things like that, I imagine it's safe to assume that you're a property owner.

So, what is expat brat's carefully-reasoned argument in support of the belief that there is no property price correction coming? Do you actually have one, or are you just crossing your fingers and hoping for the best? And did you buy off-plan for around the 500k mark (in which case you'll probably be OK), or did you buy on the secondary market for some silly price (in which case you could well find yourself in a negative equity situation)?

Confucius

Tax=Fees
Interest=Profit
Crash=Correction

Border Reiver

I'm with Brat on this one. People have been confidently predicting the crash/correction whatever you want to call it since at least late 2004. Keep predicting long enough and you will be right eventually. I'm going to start predicting the next boom. Eventually I'll be right about that.

I think there is a correction coming on high end apartments, probably towards the end of this year or the start of next but I think more like 10% than 30%. Villas and cheaper apartments will do better, or less badly.

In another couple of years supply and demand will reach some sort of balance and we (should) see a steady rise in prices thereafter.

IMHO, of course.

Eeyore

We got here in early 2005, and nobody was talking about a crash then. Indeed, the incessant refrain was "buy, buy, buy!"

Now, the way you say that, it sounds like it's just a small sector of the market. Unfortunately, as the Hermes report makes plain (and anyone with eyes and a brain can tell by looking at locations and prices), the overwhelming majority of developments are high-end, and they are mostly comprised of apartments. So you're actually talking about the single biggest market sector.

What research have you done to lead you to that figure? Remember that the likes of EFG Hermes have spent real money and time on this, and they will have access to information that you and I don't.

Hermes believe that even with the expected rate of population expansion, it will take 10 years for demand to catch up with supply, since 70% of the incoming population will not be in the market for high-end accommodation. What leads you to think they are wrong?

alfro

Ok I have read several threads of this ilk over the last couple of weeks and I am still not convinced one way or the other.

So can someone, or even everyone, give me their views on specifics.

I had hoped to purchase a 3 bedroom villa in the springs. My logic being that the demand for villas is slightly better than the demand for apartments and that any impending "correction" will affect villas less. I plan on spending 3 years minimum in Dubai. I will be getting a reasonable allowance for accomodation and would hate to see it go into someone elses pocket when it could be paying off my own mortgage. A crash, sorry correction, of 20% over 3 years would still leave me breaking even.

Should I buy a 3 bedroom villa or should I just play it safe and rent a 2 bedroom apartment?

Eeyore

My opinion would be to go for the Springs villa, but only if you've got a big deposit to put down (at least 40%) and can be sure you're buying one of the ones built by Arabtec. The fit and finish in the Arabtec ones ain't great, but they do have a reputation for not falling apart as spectacularly as the non-Arabtec ones

I would not buy a ready-to-live-in apartment now. They are overpriced, and the sole reason they are overpriced is that they are ready to live in. Anyone who thinks that the values of completed apartments are due to the Dubai property market being inherently strong is kidding themselves; they are highly valued because the constant delays to all the other projects that should have been finished by now has meant that there is a demand for liveable property; the Dubai population has increased since 2005, but the amount of ready-to-use residential property hasn't.

That demand (and concomitant willingness to pay stupid prices) is strictly finite, as many people who have bought overpriced properties on unwisely large mortgages will discover over the next year or so... they will be expecting to be lease them out charging enough rent to cover their mortgage payments *and* make a profit on top, and it just won't happen.

W10

Thing is though, analysts get paid to do this kind of thing. You don't think they should be listened to? There are obvious extenuating circumstances but the fact that experts are to a man saying a (correction, crash, whatever you want to call it) means that it is highly likely there is a correction coming.

It was the same with DFM, unsustainable, exponential growth = boom and bust cycle. Investors thought they were bullet proof while the smart fund managers moved their money quietly away...who got burned? The individual investors who never had access to expert information. Who just had to rely on the 'everything is fine' mantra being peddled by the authorities.

The same cycle will happen with property when these projects eventually get finished. It is a matter of simple economics. The market is artificial at the moment, and I'm sure the ultra-afluent here will prevent it from being as bad as it could be, but something will happen.

Likewise it will happen again with Bawadi and Dubailand. You think there is the demand for another 150 hotels in the next 5 years? With more than 120 of them being in the middle of the desert, more than 20km from the beach?

IndieG

Assume no capital gains in the forseeable future (generous assumption, as prices are expected to fall)

Your current rent - AED X (assume 15% more, won't matter)

Interest cost on property:

Insurance Costs (mortgage insurance, property insurance):
Annual Fees for property/community maintenance:
Maintenance costs - you have to bear this, could be high as warranty has expired in most cases, and quality poor):
Municipality fees:

Total : AED Y

In addition consider the following one-off fees: Transfer fees, Land Registration fees, Mortgage processing fees to Bank, Mortgage Registration fees to Emaar/developer


If Y is less than X then go ahead otherwise forget it for the moment.

W10

I forgot about maintenance and registration costs. That could be tens of thousands a year onto your bill

IndieG

Maintenance: 35k for a 2bed in the Palm!!

Lots of other 'fees' crop up. For e.g. a No Objection Certificate from Emaar if you want to sell your place! This costs another 5k!

Madam Medusa

omg, you're kidding...you actually have to PAY Emaar for the privelidge of selling your own property? I had no idea. I've heard it all now...

MM, xx

IndieG

Yes, absolutely. Read about in the property weekly - the residents have found some sort of committee, and their spokesperson was complaining about these rip-off fees. They are plenty of other fees as well. Here's a snippet:

1. Homeowners are finding they have limited leeway in choosing service providers for their communities and have to make do with the more expensive ones provided by the developers.

2. Even cooking gas delivery vans, drinking water delivery, newspaper and magazine vendors have to pay a charge of Dh600 per annum - if they have to deliver to residents in these developments. Obviously these costs get passed on to residents.

3. Residents also need to pay a sewage charge twice — once to Dewa and once through Emaar.

4. “Transfer fees as an example can vary. While some may charge Dh5,000, others can go higher," explains Solaiman. There is one private developer taking Dh15,000 for transfer charges.

5. “The developer puts what ever he wants on the contract paper, and often does not include details. Today as a seller, I have no choice, I have to pay. Changes will never come unless the procedures get clearly laid down from the Land Department.”

MJC

You're being rediculous, there's plenty more people with plenty more money that will continue the boom.

FACT

Blue Cat

for villas maybe but not for apartments, there are way too many!!!

IndieG

Dubai may become a magnet for these sorts..... Fortunately they won't be allowed to pay $50 million in cash for a new building. I don't think Dubai would risk its reputation to become a haven for money laundering.

Developers are struggling for finance - and atleast 2 major projects are lagging for this reason. No new buyers/new investors. FACT. I know this first hand......

Bye, off to grab a bite