DAMAC property collapse on Palm Jebel Ali - Construction Week Article
Apr 11th 2008, 11:46 am
#16
Account Closed
Joined: Jul 2007
Posts: 7,028
Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
When you see these DAMAC investors taking a bath, you realise the kinds of risks people are exposed to here.
I mean, imagine someone signs up for this great scheme in 2003. They put down (say) 500k AED on an apartment in Jebel Ali Palm. The next year it has gone up to 750k! Bonus! So they sell it to person B who sits for a couple of years and sells it at 1.2M AED. Nice profit for something that has not been built.
This chap, person C, keeps it for another couple of years and then seeing it is now worth 2M AED, sells it to someone else, who we will call sucker D.
Sucker D cannot wait for the thing to be built. That 2M is going to turn into a 3M pile of gold coins just as soon as it's up and he can sell it on.
But wait... he's just got a shock letter from DAMAC. The project is cancelled! DAMAC is going to refund the money plus 6% per year interest. Unfortunately, only on what *they were paid*. So sucker D is going to be lucky to get 600k AED or so, after he has shelled out 2M AED.
And of course, DAMAC has cancelled a project and now has a nice plot of land on the Jebel Ali Palm. Hmmm, let me think. What could they do??? Got it! Let's build a big block of flats (rather like the one we cancelled in fact) and sell it to even more suckers for today's going rate!
Of course in blighty you'd head straight to the high courts and you'd get DAMAC's backside roasted until they cover you for the loss that their breach of contract has cost you.
But this is Dubai and sucker D will get diddly squat if he's lucky, and 100 lashes for complaining too loudly if not.
Hubris is normally followed soon after by Nemesis isn't it? Welcome to Dubai suckers!
I mean, imagine someone signs up for this great scheme in 2003. They put down (say) 500k AED on an apartment in Jebel Ali Palm. The next year it has gone up to 750k! Bonus! So they sell it to person B who sits for a couple of years and sells it at 1.2M AED. Nice profit for something that has not been built.
This chap, person C, keeps it for another couple of years and then seeing it is now worth 2M AED, sells it to someone else, who we will call sucker D.
Sucker D cannot wait for the thing to be built. That 2M is going to turn into a 3M pile of gold coins just as soon as it's up and he can sell it on.
But wait... he's just got a shock letter from DAMAC. The project is cancelled! DAMAC is going to refund the money plus 6% per year interest. Unfortunately, only on what *they were paid*. So sucker D is going to be lucky to get 600k AED or so, after he has shelled out 2M AED.
And of course, DAMAC has cancelled a project and now has a nice plot of land on the Jebel Ali Palm. Hmmm, let me think. What could they do??? Got it! Let's build a big block of flats (rather like the one we cancelled in fact) and sell it to even more suckers for today's going rate!
Of course in blighty you'd head straight to the high courts and you'd get DAMAC's backside roasted until they cover you for the loss that their breach of contract has cost you.
But this is Dubai and sucker D will get diddly squat if he's lucky, and 100 lashes for complaining too loudly if not.
Hubris is normally followed soon after by Nemesis isn't it? Welcome to Dubai suckers!
Apr 11th 2008, 5:00 pm
#17
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Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
To be fair of course, many people have done well out of investing in Dubai property. But I think few appreciate the risks.
The price differential between off-plan pricing and finished property is something that I found curious when I first came to Dubai. In many cases, they were offering you two bed apartments off-plan, for completion in 2 years time, and the price was around half of the price of a similar apartment that was already built.
If you really wanted to own a place for the long term, then you'd be better off just buying off-plan and renting for two years until the place is built. You'd still be quids in.
Of course the reason for the differential is quite clear - it accounts for the risk between buying a place that is complete and one that is not (and hence might not ever be). And it was such a big gap, it really rang alarm bells for me. It suggests a fairly hefty risk that the place might not ever be built. It seems a lot of people did not consider this.
The price differential between off-plan pricing and finished property is something that I found curious when I first came to Dubai. In many cases, they were offering you two bed apartments off-plan, for completion in 2 years time, and the price was around half of the price of a similar apartment that was already built.
If you really wanted to own a place for the long term, then you'd be better off just buying off-plan and renting for two years until the place is built. You'd still be quids in.
Of course the reason for the differential is quite clear - it accounts for the risk between buying a place that is complete and one that is not (and hence might not ever be). And it was such a big gap, it really rang alarm bells for me. It suggests a fairly hefty risk that the place might not ever be built. It seems a lot of people did not consider this.
Apr 12th 2008, 5:00 am
#18
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Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
Looks like this is not the only "collapse". Here's another one - 142 million Euros collected from German investors to build a 1000 room luxury hotel in Dubai - was to be completed in July 2007. Current status is a "fence around an excavation site".
http://archive.gulfnews.com/business.../10204959.html
http://archive.gulfnews.com/business.../10204959.html
Apr 12th 2008, 5:57 am
#19
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Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
I'm sure there will be lots more to come as developers get caught between more expensive raw materials, a labour shortage and completion dates that were always unrealistic anyway. Before buying off plan it is worth asking the developers how many projects they have already completed, and how many have been delivered on time
.
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Apr 12th 2008, 6:36 am
#20
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Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
By the way DAMAC has a special "exemption" from RERA to open escrow accounts
Apr 12th 2008, 8:36 am
#21
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Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
I wouldn't touch anybody who needs an exemption for escrow.
Apr 12th 2008, 8:51 am
#22
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Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
One of the scariest things to me, is about the complete lack of transparancy for a company like Damac.
When so much money is being held, but work on developments is about 2 years behind those payments, there surely has to be a worry that the developer can be 'taking from Peter to pay Paul'.
Particularly with lavish inducements such as cars, planes!?! to buy their off plan properties.
Damac must be spending huge amounts on promotion - I was in the Uk last month and they have opened a shop directly opposite where one of my retail outlets used to be - and the combined rent and rates alone on that were GBP£100k per annum. Chicken feed I suppose on its own, but if they are doing that all over the Uk, then that is some cost, seeing as staff don't work for 3,000dhs a month over there.
The other point with those Uk retail premises is that surely this demonstrates more than a little desperation for 'new victims' to buy into their vision.
Maybe I am just another doom and gloom merchant. But common sense seems to say - if it looks and feels wrong, then it most probably is.
Or maybe the new proposed timeshare law will be the way that the apartment market here will continue onwards and upwards.
When so much money is being held, but work on developments is about 2 years behind those payments, there surely has to be a worry that the developer can be 'taking from Peter to pay Paul'.
Particularly with lavish inducements such as cars, planes!?! to buy their off plan properties.
Damac must be spending huge amounts on promotion - I was in the Uk last month and they have opened a shop directly opposite where one of my retail outlets used to be - and the combined rent and rates alone on that were GBP£100k per annum. Chicken feed I suppose on its own, but if they are doing that all over the Uk, then that is some cost, seeing as staff don't work for 3,000dhs a month over there.
The other point with those Uk retail premises is that surely this demonstrates more than a little desperation for 'new victims' to buy into their vision.
Maybe I am just another doom and gloom merchant. But common sense seems to say - if it looks and feels wrong, then it most probably is.
Or maybe the new proposed timeshare law will be the way that the apartment market here will continue onwards and upwards.
Apr 12th 2008, 8:59 am
#23
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Joined: Feb 2007
Posts: 29,625
Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
Damac have retail outlets in the UK? just shows how many Brits are prepared to invest out here doesn't it.
Apr 12th 2008, 9:03 am
#25
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Posts: 29,625
Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
I would have been shocked too! but even the tatty little local newspaper we get at home was advertising buying in Dubai, can't remember which developer though. I saw more of Dubai on the television in the UK than I do here, I even learnt about a new development near sports city, not reading the paper here but on the adverts on UK telly!
Apr 12th 2008, 9:06 am
#26
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Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
just googled and found this article. despite the spin its reasonably enlightening.
http://www.zawya.com/story.cfm/sidZAWYA20070131091730
starts..
Dubai, UAE, January 31th: DAMAC PropertiesDAMAC Properties
DAMAC Properties
News | Profile | Officers
, the largest private residential developer in the Middle East recently hosted a series of events in London, Manchester and Glasgow to keep clients and other stakeholders informed of the extensive progress on the company's developments in Dubai. British investment in DAMAC Properties
accounts for about 45% of its overall sales. The company, responsible for projects on the Palm Islands, Dubai Marina and other free zones in the Emirate sell property off-plan and recognizes the importance of keeping purchasers updated on the progress of their overseas property investments.
http://www.zawya.com/story.cfm/sidZAWYA20070131091730
starts..
Dubai, UAE, January 31th: DAMAC PropertiesDAMAC Properties
DAMAC Properties
News | Profile | Officers
, the largest private residential developer in the Middle East recently hosted a series of events in London, Manchester and Glasgow to keep clients and other stakeholders informed of the extensive progress on the company's developments in Dubai. British investment in DAMAC Properties
accounts for about 45% of its overall sales. The company, responsible for projects on the Palm Islands, Dubai Marina and other free zones in the Emirate sell property off-plan and recognizes the importance of keeping purchasers updated on the progress of their overseas property investments.
Apr 12th 2008, 9:08 am
#27
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Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
from a cursory glance it looks like damac are marketing property for uae jordan saudi egypt india lebanon and more from their Uk offices and retail outlets.
Apr 12th 2008, 9:50 am
#28
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Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
Apr 12th 2008, 1:30 pm
#29
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Posts: 688
Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
I'm sure there will be lots more to come as developers get caught between more expensive raw materials, a labour shortage and completion dates that were always unrealistic anyway. Before buying off plan it is worth asking the developers how many projects they have already completed, and how many have been delivered on time.
.But as they say in financial circles "past performance is no guarantee of future performance". Take a look at Northern Rock shares in 2006/2007. If you simply extrapolate past performance into the future without considering changes in market conditions, over-valuations and the level of risk then you are going to come a cropper.
I would see DAMAC opening sales offices in London with some caution. I remember during the dotcom boom, towards the end when the shine started to rub off, that I was getting calls from day-traders in New York try to extract 50 grand to put into the Nasdaq. It strikes me as rather similar - hope to find people who are less aware of the risks and more likely to have not heard the horror stories that those living in Dubai and more in touch with things here have.
Apr 12th 2008, 1:32 pm
#30
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Re: DAMAC property collapse on Palm Jebel Ali - Construction Week Article
I would not ask the developer, I would get my information myself. Buying anything that is such a big investment, you need to do your own research.
But as they say in financial circles "past performance is no guarantee of future performance". Take a look at Northern Rock shares in 2006/2007. If you simply extrapolate past performance into the future without considering changes in market conditions, over-valuations and the level of risk then you are going to come a cropper.
I would see DAMAC opening sales offices in London with some caution. I remember during the dotcom boom, towards the end when the shine started to rub off, that I was getting calls from day-traders in New York try to extract 50 grand to put into the Nasdaq. It strikes me as rather similar - hope to find people who are less aware of the risks and more likely to have not heard the horror stories that those living in Dubai and more in touch with things here have.
But as they say in financial circles "past performance is no guarantee of future performance". Take a look at Northern Rock shares in 2006/2007. If you simply extrapolate past performance into the future without considering changes in market conditions, over-valuations and the level of risk then you are going to come a cropper.
I would see DAMAC opening sales offices in London with some caution. I remember during the dotcom boom, towards the end when the shine started to rub off, that I was getting calls from day-traders in New York try to extract 50 grand to put into the Nasdaq. It strikes me as rather similar - hope to find people who are less aware of the risks and more likely to have not heard the horror stories that those living in Dubai and more in touch with things here have.
