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arniegang · Apr 27, 2006

Great post Shaf - totally agree with everything you have said.

Cons, you must remember another golden rule in property - just think long term buddy. When i say "long term" i mean 15-25 years. We can all make a quick buck over the short term whether it be stocks, gold or property. A wise investor will combine both long and short term in his /her portfolio.

From my perspective Cons, i have "had it" and "lost it" more times than i care to remember. My motto is "The hardest lessons we learn in life are generally the ones we PAY for"

constantine · Apr 27, 2006

arnie
very true...thats the reason i really re-thought the whole dubai thing...i guess making a fast buck is not on my mind now...but the fact that i don't want to be paying someone else while i could be paying myself...i guess i will wait it out till JBR is completed...in fact our company is trying to do a deal with them...which will allow us substantially subsidised housing...if that pulls thru...then all my rent worries are out of the window...keeping my fingers crossed...the potential of JBR as an investment really looks appealing...i am imagining a scenario 10 years down the line, when a beachfront condo will be worth it's weight in gold...and perhaps jebel ali will be the new downtown...thus my alternate reasoning with GOA...where there are new beachside full security/gym/spa/pool/solarium(what the heck is a solarium doing in a beachtown...i dont get!!)...also me being indian is a huge advantage...will be doing a reci run in sept...to check that out...

arniegang · Apr 27, 2006

You learn well Cons, the signs and making of a wise man :wink:

Actually JBR is my hot tip for the "long term" investor. Just now though the prices are ridiculous, im sure they will dip in the short term after completion.

Dont forget, there are a lot of properties there and equally as many people who have to find the completion money. The nearer it gets to completion, for those that cant fund the balance, is the time to make "offers" :wink:

constantine · Apr 27, 2006

arnie...
thanks mate...just getting interested!!...so by completion money you mean the money needed to fund the entire end payment...or the innitial downpayment...that effectively means that if JBR is valued by the bank 900 k...and in actuality it is 1.2 mil for 2 bd rooms...then the person who has bought it is reselling it bcoz he cant meet the payment...i stand a chance (perhaps good or bad)...of grabbing it at perhaps a million?...did i get the math right?

arniegang · Apr 27, 2006

You got it Cons, there will be a lot struggling to find the spondoolies when it comes to "get yer wallet out time".

I have noticed there is an awful lot on for sale on JBR at the moment. I think a lot of those that are currently up for sale are the ones NEEDING to "jump ship" before "pay up" day.

Just a huntch and feeling i get.

benwj · Apr 28, 2006

Arnie.
Not sure when you last looked at the freehold section of the Gulfnews, but you are right. The front page has been all JBR recently and is growing by the day. The prices have not dropped yet, but you have convinced me that this is bound to happen closer to the completion date.
Excellent point about the population growth. I feel that the salaries need to be increased to attract a lot more people to Dubai, but I would have thought that this would then push the cost of living up. You said that "income is not keeping up with the cost of living and therefore inflation will continue on the up".
I don't understand how? Can you give me a quick lesson?

arniegang · Apr 28, 2006

benwj wrote:Arnie.
Not sure when you last looked at the freehold section of the Gulfnews, but you are right. The front page has been all JBR recently and is growing by the day. The prices have not dropped yet, but you have convinced me that this is bound to happen closer to the completion date.
Excellent point about the population growth. I feel that the salaries need to be increased to attract a lot more people to Dubai, but I would have thought that this would then push the cost of living up. You said that "income is not keeping up with the cost of living and therefore inflation will continue on the up".
I don't understand how? Can you give me a quick lesson?

Benwj

I keep saying i dont know much about economics, but i will tell you what i know to try and answer your question

OK like in the UK part of the economy is liked to the RPI (retail price index). This makes up part of the economic situation in any country. Unlike the UK, Dubai's inflation or RPI is not linked to government borrowing because in the UAE they "dont borrow".

OK, thats the basics. Soooo in DXB lets assume prices for goods are increasing. That affects the GDP (gross domestic products - import/export). If prices continue to rise the differential widens in the populations ability to afford those products.

Now lets assume, wages increase "in line" with the cost of goods and services.

When this happens, it starts the cycle again. Wages increase and the companies products have to increase to make up the differential. If this didnt happen the company would have to reduce their profits.

So the products go up in price again and the cycle starts all over again. This is basically how inflation works.

So in the UK, this is why we have to cap or encourage limited "annual salary increases". The level has to be set at or below the RPI to keep inflation either "in check" or "driving inflation down".

Other factors include things like export/import. Again these contribute to inflation if the goods coming into the country.

The main problem with the economy in the Emirates and some of the other gulf countries, is the currency is "pegged" to the US $. Unfortunately the dollar is stong at the moment, making "imports" more expensive. This is not helping the economy also.

Hope i've explained it ok.

sharewadi · Apr 29, 2006

Wow

. A lot of useful and thoughtful information there.

Yes, I agree there's a lot of speculation in the market and prices have increased rapidly in the past couple of years.

My question would be what's a fair value for a property and compare prices to that. But determining a fair value is difficult in such a new market and with many factors or uncertainties. So my best guess is to compare Dubai to another established city and look at prices/sq ft. Then try and adjust up or down to compensate for risk factors, changes in population, level of supply etc.

It's a mugs game and I'm bound to get it wrong but at least I'll know by how much I got it wrong

.

And of course it'll depend a lot on what you personally think of Dubai.

A 1 bdrm apartment in Dubai Marina selling for 700-800k dhs sounds like a lot compared to 300k - 400k dhs a couple of years ago (weren't JBR OPs as low as 200K?).

A 1 bdrm apartment in a modern city in a tax-free country with sun and sand for 100,000 pounds getting a 10% return tax-free probably sounds like a good deal to the average Londoner (yes I know, Dubai is not = London).

And yes I do think there's a risk that prices will drop, but I don't think the risk is because properties are inherently overvalued yet. Probably more to do with the speculators cashing in on their gains.

I'd still buy now - but carefully

...

There was quite a good read about the property law in Time Out a couple of weeks back. You need to login to see it but I'll quote the last part...

So where next for the property market and the development of the laws that govern it? ‘We’re on a gradual slope,’ says Ian Hollingdale. ‘It’s still a place where people want to live. Europeans want to come, Iranian money is a big influence and Indians love it because it is so close to home.’ And what about the proposed laws? ‘They need ratifying – that would make everyone’s life easier. Especially for the institutions lending money to buyers.’ DAMAC’s Peter Riddoch goes a step further in his prediction for the future. ‘I believe that Dubai is such an enlightened country that the day will come when expatriates will be able to buy property anywhere.’

This of course is speculation, but let’s look at the bigger picture for a moment. Oil prices are sky high and will remain so for the foreseeable future, meaning the Gulf is awash with cash, while the nearby economies of India, China and Russia are also booming: where does all this excess revenue go? The government of Dubai has an answer: build the world’s premier tourist attractions, double the population and offer every incentive possible to people to come here to live, work and spend money. Fast forward to 2015 when the new airport is bringing in millions of tourists a year, Dubailand is open, the Marina is finished and the Palm Islands are operational. What will a sea-view apartment be worth then?

Dubai’s rulers are investing incomprehensible amounts of money in this vision and they are asking you to trust them to get it right, and indeed to buy into it yourself. But the plan also seems to involve establishing the minutiae of Dubai’s property law along the way. While sceptics play a waiting game, many others have faith in Dubai’s ability to deliver. For all the expert analysis, the decision remains yours to make.

sharewadi · May 06, 2006

sharewadi wrote:I'd still buy now - but carefully ...

This comment I made has been nagging away at me the last couple of weeks. Now I'd say VERY carefully, or probably not. There's a lot of investors bleeding on the local stockmarkets the last few weeks. Also the Saudi markets.

What I'm wondering is how much money these same investors have also put in to the property market, and if they'll decide to start selling their properties to pay off the bank loans they took out to buy shares. And if that happens, will it be significant enough to be noticed on the property market?

Out of about 300,000 registered shareholders for the local markets, 90% are UAE or Saudi. I presume the proportion is way different for property ownership, that's why I'm not sure there would be a significant effect.

fayz · May 06, 2006

sharewadi wrote:Out of about 300,000 registered shareholders for the local markets, 90% are UAE or Saudi. I presume the proportion is way different for property ownership, that's why I'm not sure there would be a significant effect.

I'm not sure it is that different in the property market, I have no facts or way to gather them but I’m guessing over 80% of property owners (dirham wise) is Saudi and local UAE money.

Remember foreigners buy an apartment or 2, Saudis buy a building or 3 :shock:

These people are all in debt now and will need to do something as all their margins are being called. My big question is will it turn significantly by late July as I need to find a place for August, I hope so but I don’t think it’ll be that soon, which sucks for me.

MaaaD · May 06, 2006

Thanks guys for a great welth of info in this thread. I think this summer will be interesting turn of events. I am also up for renewing my rental contract in september and waiting for the bubble to burst so that i can buy

Anyone have any good reads on the relationship of the stock market to the property market ? from what i understand the latter lags after the former.

sharewadi · May 07, 2006

fayz wrote:Remember foreigners buy an apartment or 2, Saudis buy a building or 3

These people are all in debt now and will need to do something as all their margins are being called. My big question is will it turn significantly by late July as I need to find a place for August, I hope so but I don’t think it’ll be that soon, which sucks for me.

Yes, too true. Is it possible though, that for every Saudi/Emirati buying a floor with 10 apartments, there's 10 Brits buying 1 apartment each?

MaaaD wrote:Anyone have any good reads on the relationship of the stock market to the property market ? from what i understand the latter lags after the former.

There's a correlation but I've not investigated it enough yet to comment. My instinct says that if the total sum of investment money is relatively fixed, then it will slosh from one opportunity to another. At the moment I'm very curious to know what's happened to the tens of billion dirhams lost on the markets here (and the hundreds of billions lost in Saudi). Is it in property? Or in the bank looking for another opportunity? There was a comment in the papers that some funds may flow to Europe/US investment opportunities. Also a comment that foreign investors may view local markets as attractive now or soon.

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