IndieG

- According to the Gulf News property Weekly.

Apparently, with so many new developments launched almost every week and the wide choice now available to investors, the freehold market has 'started to make its first acquaintance with negative equity'. Prices of units in some of the developments are hovering at their launch price or lower in the secondary market.

Walter Hart, Head of Special Projects at Better Homes, also wonders 'What will happen once all the myriad of projects under construction, or in the pipeline, come to the market? Will there be sufficient levels of demand to absorb all this stock'?

Delays in projects have apparently 'greatly reduced investor interest and created legal disputes" These investors are finding it difficult to sell their residences in the secondary market even at the original price.

In the case of Jumeirah Lake towers compared with the peak of well over AED 800 per sq foot, prices have softened to around AED 700-750 a sq foot.

I wonder how many individual investors put their hard earned money and jumped in just to make a quick buck

How many of these investors really do have the financial clout to sue the developers for delays (delays of over 18 months in some developments, since they keep changing their plans and can never seem to finalise it).

I guess those who have bought ready to occupy property and are actually living in it and saving on rent need not worry. Also, the losses are limited to the newer developments - but I wonder if this could have a ripple effect on the older properties?

IG

Truth Speak

Wow, they said the bubble would burst, but not this soon. Alot of people have been put off by the building site appeal. Hopefully my rent will soon follow the trend......

shoushou

Hear hear.......

Happiness

YAY!!! HAAHAA!



ahem...

TA5

That would be rather futile as this is a country without any form of property law...besides, as the government is either a partial or whole owner of all the major development companies you'd be suing the government...which doesn't exactly work here.

As i've said all along, its all a big scam, i sort of feel sorry for anybody who owns property here, only sort of because anybody who actually bought property needs their head examined.

IndieG

Good God, you sound like my other half :scared:

The other thing I heard was that investors would shortly be allowed to buy property even outside the present developments.

Later....got to go

IG

ZooZ

[QUOTE=TA5] i sort of feel sorry for anybody who owns property here QUOTE]

The thing is.. that investors buy property from developers before sactioning and the investors then resell the property to the common ppl.. i.e. us.. with a profit of a min 15% as they bought it years ago with 15% below market incentive price and sell it a year or two later for original price + 15% + inflation % + property rise %, this is how investors make money..

to say that they lose money of original price.. that is a :scared: ...
coz the property price has dropped by a figure below inflation (3% a year) and below the 15% inv incentive... that could be a stagerring 20% drop in price..... before an invester can lose... sirous s**t.. if u are an investor or work with real estate or property development activities, construction/supply/support...

otherwise... enjoy a slow down in rent in the future.. not now.. coz if buyers get put off they will want to rent.. hence increasing the rent demand for the short term.. and rents will go up firt before all these properties find buyers and become available..

ZooZ

W10

I don't really believe that hundreds of projects are falling below launch price at all - unless you are talking about individual investors buying off plan in the last 2 months.

If you bought off plan on Jumeirah Lake Towers at the launches 2 years ago it was probably for less than Dh650 sq ft.

Also, why should you feel sorry for them? These people are speculating to try and make a fast buck. With any investment there is a risk, and it's not as if this risk has been kept a secret over the past year. If they lose money then that's just the way it goes. They could equally have made 200% profit in 18 months.

Just out of interest - for negative equity to occur, the markets would have to actually collapse. Being as in the UAE you need to have actually put down a hefty deposit. Most mortgages are only 15 years as well meaning your capital is repaid far more quickly than say in the UK.

The property market is definitely on a downward spiral though. Which I guess is why DM is going to introduce genuine freehold (where you own the land as well) in the next 3 months.

ZooZ

i totally agree with you W10... just the statement of negative equaty is serious.. for these investors to go from big bucks to losing money is a serious situation.. if it is true...
ZooZ

W10

Well according to the synopsis of the article - prices are hovering at launch level or lower. Which suggests that there s a simple softening of prices after an original rise.

That isn't negative equity at all.

For Gulf News property weekly to make such statements would be pretty irresponsible - not to mention completely against the 'on message' mentality of the publication.

ZooZ

G thanks.. my millions are safe , for now ..
well in this case, it will take time.. and this is IF it dropped down to negative equaty.. so very little effect on us in the short and medium term, all what it means.. this is an indication of a boom slowdown and a possible market change in the long term, it could go either way, this is one indication and tells you to watch out for similar indications... if you want to make long term decisions..
ZooZ

MJC

Well, perhaps W10, with your incredibly positieve attitude that we all know and love should have a word...

IndieG

The point is that there is a loss of investor interest - this is the frightening part, since a majority of the buyers were investors (including speculators), this was what drove demand up. Investors were buying up entire floors - now with holding costs increasing and demand coming down, won't these investors cut their losses and start 'dumping' ?


IG

ZooZ

Hiya Anya..
at the biginning it means they are not making as much money.. they are still making money though.. and unless there is not somewhere else to invest with higher reward (say Qatar, ) they will carry on and pressure will be put on developers, builders to cut cost.. it does not look like a losing business.. it is just slowing down..
ZooZ

IndieG

Hi
Yup...very high liquidity in the UAE market, and investors will need to look where to park their funds. Within the next couple of months, billions of dirhams expected in the UAE due to the redemption of the 'India Millennium Deposits'. The Indian Govt had raised $ 6.5 billion, of which 20% came from the Indian investors in the UAE !
Unless these investors choose to invest in the Indian Stock markets or may be in Qatar

Anya