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The current population of Dubai is 64% from the Asian sub-continent. The average earnings of this percentage...is $275 per month!

The fuel prices here are capped by the government. Emarat and ENOC are forced to buy their fuel from ADNOC at market rate, but are unable to play price war at the pump. This is the reason why every fuel station has a mini mart or a food outlet as these are their only way to make any return. Currently, these government agencies lose approximately $1 million per week due to the $100+ barrel price for oil. If you want really cheap fuel, drive down to Hatta and fill up at the Shell station in the Omani enclave before the Hatta Fort Hotel.



Knight

There will be a correction in prices, but not a drop. The price increases may well drop, but I'm not convinced the prices themselves will drop in the immediate future. Oversupply will hit the market but in the short-term this will only affect the size of investors' premiums and they won't be making monstrous gains for much longer, but there will still be gains.

The economic fundamentals are strong and the emirates are leveraged on massive oil reserves (and, more recently an increasingly diversified economy), rather than huge debts to China as every other nation seems to be.

I would say however, that Abu Dhabi is looking like a much sounder investment. The market has learned from Dubai's mistakes and as a result will be much more stable with mature price growth and less boom and bust. Prices are still affordable (just) and, with massive undersupply for the next 3 years, is a very attractive investment.

philh wrote:There will be a correction in prices, but not a drop. The price increases may well drop, but I'm not convinced the prices themselves will drop in the immediate future. Oversupply will hit the market but in the short-term this will only affect the size of investors' premiums and they won't be making monstrous gains for much longer, but there will still be gains.

The economic fundamentals are strong and the emirates are leveraged on massive oil reserves (and, more recently an increasingly diversified economy), rather than huge debts to China as every other nation seems to be.

I would say however, that Abu Dhabi is looking like a much sounder investment. The market has learned from Dubai's mistakes and as a result will be much more stable with mature price growth and less boom and bust. Prices are still affordable (just) and, with massive undersupply for the next 3 years, is a very attractive investment.

what planet have you beamed in from?

"there will be a correction in prices not a drop"



which bit of "Emirates Bank and Dubai Bank have ceased all resale mortgages and last week Shiek Mo pumped 70 billion AED into the banking system to prop it up" did you not understand ?

This has nothing at all to do with oil, it is to do with the capacity of the banks to finance mortgages to buyers and investors and even developers. The market in AD has learnt nothing from Dubai, they are running parallel to each other.

Arnie has been saying the same thing for at least a year. During which time, property prices have pretty much doubled.

Thanks for your insight.

john smith wrote:Arnie has been saying the same thing for at least a year. During which time, property prices have pretty much doubled.

Thanks for your insight.

Yes they have, to buy from new or off plan. How many people have actually managed to re-sell?



Knight

john smith wrote:Arnie has been saying the same thing for at least a year. During which time, property prices have pretty much doubled.

Thanks for your insight.

and was it not you John smith who earlier this year was advocating good buy's at JLT earlier this year,

What a joke JLT are near enough un-rentable let alone unsaleable. Anyone who bought there needs to see a doctor. Even most of the agents in the Marina area wont touch JLT.

Property prices have nowhere near doubled in the last year. Like DK points out, the hype has been with regard to off plan purchasing frenzy. People can pay what the like at the height, its a very different story when it comes to selling.

Emaar - Emirates Mall, late last year and resales this year was asking nearly 3 million for a 1 bed ( 800 sq feet)

Does anyone really believe they have doubled in price?
,
I would bet when they are complete next year they will struggle to achieve 2 million.

If you ask any reputable agent in Dubai now they will confirm re-sales are few and far between and the market is starting to stack up with unsold properties - end of..

Yes i have been saying this for the last year and to those who are realistic it is happening now - i wasn't that far out

so I wont get a return on the 1.2 million that I bought a 1 bed in JBR for in January? sea view, high floor?

thanks again.

long term I like JLT and will definitely look there if the right thing comes up at the right price.

john smith wrote:so I wont get a return on the 1.2 million that I bought a 1 bed in JBR for in January? sea view, high floor?

thanks again.

long term I like JLT and will definitely look there if the right thing comes up at the right price.

If you are seriously looking at buying there, look very very closely at the quality of what you are buying.

A friend just rented a 2 bed apartment there and the quality was like something you would have found in a 1960's Moscow building! The construction was done by a blind man using bits of cardboard and some sellotape. To make it worse, she had to lay out 130,000dhs for the privilege of living in a glorified cupboard!

Complete crap!



Knight

No I'm not seriously thinking about buying there or anywhere else at the moment.

What a joke JLT are near enough un-rentable let alone unsaleable. Anyone who bought there needs to see a doctor. Even most of the agents in the Marina area wont touch JLT.

What frustrates me is where people like Arnie express their OPINIONS as if they are fact.

His statement above is a typical example - it is nearly impossible to find an apartment to rent in JLT and the prices are very high. If you can find one you have to act quick or it will be gone.

When I looked at JLT (1 year ago), you could buy a 1 bed in Saba for about 850K...

Anyone who bought there needs to see a doctor.

or a bank manager as they have made a very tidy profit.

Err, which planet have you been beamed in from Arnie?

"This has nothing at all to do with oil".

Dubai as we see it now and as it will develop in the future is fundamentally based on oil reserves. Every market and industry (especially the banking and finance markets!) in Dubai is inextricably linked to oil. A trivial concept to say the least.

"The market in AD has learnt nothing from Dubai"

Another strange opinion. AD has gone to great lengths to develop its Urban Structure Framework Plan for the year 2030. Even a cursory glance at this document will show you the lessons learned.

"Shiek Mo pumped 70 billion AED into the banking system"

Who knows the effect this will have on the market? I am of the opinion that such a move provides the financial markets and its investors with a great deal of confidence and security that they have such financial backing. Further, the 70bn will increase liquidity and in turn increase the level of lending activity by the banks. You will have noted similar moves by governments across the globe.

Let's get one fact right - nobody can say for sure that prices will drop. I am of the opinion the price increases will drop (i.e. people wont be doubling their money anymore, but they will still be making gains), you are of a different opinion.

Remember, nobody can be completely sure of what is going to happen, the best they can do is offer an opinion. Have some humility to accept that others do not share your views.

john smith wrote:so I wont get a return on the 1.2 million that I bought a 1 bed in JBR for in January? sea view, high floor?

thanks again.

long term I like JLT and will definitely look there if the right thing comes up at the right price.

I dont believe for one second you bought this in January for 1.2 million. If you did it was probably from someone who was deaf,dumb and blind

Summer 2007 they were selling like hotcakes @ 1.5 million

philh wrote:Err, which planet have you been beamed in from Arnie?

"This has nothing at all to do with oil".

Dubai as we see it now and as it will develop in the future is fundamentally based on oil reserves. Every market and industry (especially the banking and finance markets!) in Dubai is inextricably linked to oil. A trivial concept to say the least.

"The market in AD has learnt nothing from Dubai"

Another strange opinion. AD has gone to great lengths to develop its Urban Structure Framework Plan for the year 2030. Even a cursory glance at this document will show you the lessons learned.

"Shiek Mo pumped 70 billion AED into the banking system"

Who knows the effect this will have on the market? I am of the opinion that such a move provides the financial markets and its investors with a great deal of confidence and security that they have such financial backing. Further, the 70bn will increase liquidity and in turn increase the level of lending activity by the banks. You will have noted similar moves by governments across the globe.

Let's get one fact right - nobody can say for sure that prices will drop. I am of the opinion the price increases will drop (i.e. people wont be doubling their money anymore, but they will still be making gains), you are of a different opinion.

Remember, nobody can be completely sure of what is going to happen, the best they can do is offer an opinion. Have some humility to accept that others do not share your views.

We are just going to have to disagree, i still maintain the current situation in Dubai has nothiong to do with oil.

You need too do some more research into your facts/opinion with regard to :

Dubai as we see it now and as it will develop in the future is fundamentally based on oil reserves. Every market and industry (especially the banking and finance markets!) in Dubai is inextricably linked to oil. A trivial concept to say the least.

This is a ridiculous statement that is actually not only misleading but untrue. Dubai's now short term oil reserves and revenue are only a small percentage of Dubai's GDP. The oil will be gone by totally 2015.

The banking situation in Dubai as in the UK and US and almost everywhere else has nothing at all to do with oil.

See this for the actual figures

http://www.ameinfo.com/122863.html

and just in case you doubt these figures i enclose a quote from Shiek M last year spelling it out, so even you PhilH can understand

http://www.menafn.com/qn_news_story_s.a ... 1093141625

This is of course my personal opinion

We probable are!

"This is a ridiculous statement that is actually not only misleading but untrue. Dubai's now short term oil reserves and revenue are only a small percentage of Dubai's GDP. The oil will be gone by totally 2015. "

It's actually completely true and not ridiculous in the slightest. The level of GDP in other sectors (e.g. service, manufacturing, finance, IT, education, retail, transport etc) has grown because of the recognition that oil will one day run out. In other words, the sole reason for the existence of these industries in Dubai is because the pumps will run dry pretty soon and Dubai will need to be self-sufficient and not reliant on oil. And what funded the creation of these other sectors? Oil reserves!

So everything is dependent on the level of oil reserves.

I dont believe for one second you bought this in January for 1.2 million. If you did it was probably from someone who was deaf,dumb and blind

So you are accusing me of lying?

Purchased through better homes on the 21st january. There were several available at around that price at that time so again goes to show that you are not as in touch as you thought (maybe all the sellers were deaf dumb and blind?)

In summer 07 you could buy 1000sq/ft 1 beds direct from Dubai Properties for 1.22m and that included 99% finance from Dubai Bank - remember the adverts...?

They are currently advertised at 2.5 - now I don't think for a minute that I would get that much for it, but whichever way you look at it not a bad investment at a time when you were saying exactly the same things as you are now.

time will tell people

Re the oil debate: Dubai has hardly any oil. It has some gas, but the oil revenues are actually shared incomes gifted from Abu Dhabi as the legacy of the 'United' Arab Emirates. As a nation the UAE is oil revenue rich. As individual Emirates, some are have's and some are have nots.



Knight

I think one of 2 things will happen: Either prices will freeze at their current levels for a LONG time (2, maybe 3 years), or else there will be a major correction in this market, despite what other people might say. Dubai is on planet earth like the rest of the countries, it IS affected by the global crisis, liquidity from local banks has dried up, western expats are not buying anything in Dubai by fear of said correction. So basically there is no money to buy. Despite people claiming that prices will keep going up, the reality is that the average salary in Dubai is not even close to supporting an average real estate purchase, and as long as these 2 variables are not in line, the market will struggle. For them to get in line with one another, prices must freeze in order for salaries to catch up, or real estate will have to take a drop to adjust. In the past foreign investors fueled all these crazy price surges and crazy activity, I think

Dubai has now reached another phase of it's market where buyers will be mostly people living locally, and buying in order to live in and not as an investment. The gains will be more modest as the market matures, but on a 5 to 10 year outlook, Dubai is a great investment, with high immigration, accelerated devellopment, high ambitions, strategic positioning, and the rise of Asia and Eastern Europe. My guess is the real estate market in Dubai will do slightly better than most in the world for the next 5 to 10 years, then it will follow the herd.

Hey Arnie, can i ask what industry do you work in......banking, real estate, hedge funds? As you seem to know what is going on in Dubai i was interested to know.

I remember back in the UK the papers had been saying that house prices are going to fall EVERY year since 2000 and look, it has taken 8 years to hit. Back then EVERYONE was an economist and with each year that past noting happened!

Now I'm not saying that they same will happen here, I know of lenders here that are still offering 90% LTV's....now I'm not an expert in the banking sector but surely if the banks have reached their max lending amounts for the year then the lender would change the LTV's as there is no money left in the pot. Personally I think that the Gov here didn't see Dubai would get this much interest from all types of people. Yes they have had the scams on buildings being sold and the "investment" but which country doesn't at least here people are put in prison for writing a bad cheque!

Now with Sheik Mo adding this cash to the market. Do you really think that he would let his economy fail or would his other Emirate Brothers ! Dont forget the UAE share the oil and gas revenue income and have been doing so for some time. Dubai wanted to have another stream of income apart from the oil and gas, Dubai was the first on the map, a lot of people in the US, UK and Europe think that Dubai is the capital, Now I know that you are going to shout me down about that, but its true, so the other Emirates are all earning from the vision that happened in Dubai all those years ago.Think about it Sheik Mo, wants to have the Emirate that is the tallest this and the biggest that, fair play to him, he wants to have a place that people want to come and see.

Also you always have two types of sellers, the ones that have to sell because they cant make their next payment and the ones that can! Now the little man that flips with 5% yes he is one the that will be effected, (to be honest good, glad to get rid of him) but with all the new RERA laws coming in, this man will go somewhere else. So that leaves us with the one that can make his next payment, he doesn't need to PANIC like the other man, so he will hold onto his property. To be fair I am starting to buy properties at the moment off plan with an islamic mortgage so I cant see the issue, yes you can some good prices with those people that cant make the next payment. I'm not worries about a correction, a drop in prices or what ever you want to call it.

Rental properties are in great demand at the moment, i know of agents that are searching for stock and they have so many people looking.....so for the rental prices to fall is not going to happen. The sales and rental market do not work together, look at the UK house prices are falling and the rental market is going nuts.......dont forget people need to live somewhere! We cant pitch a tent in the desert!! Some people might go back to their home countries........then again some companies pay the rents for their workers!

Also Lloyds, HSBC and Tamweel all increased the LTV's yesterday, so I dont think that they are worried!!

So come on the tell me that I'm wrong and stupid!! Big it on!

Its not the case that the banks have reached their max lending amounts, the two factors that limit their lending criteria are

the amount of ready cash available to them in relation to the amount of free cash from investments and savings/deposits.

The viability of lending based on the affordability and means by the purchaser. At the moment if you take into account the interest payable on a mortgage and offset this against the income it can produce, there is little or no scope in Dubai at the moment for an investor to break even, let alone make an income.

Take for example an average 2 bedroom Emaar propery in the marina area.

3million Dhs value

25 year mortgage 95% LTV @ 8% interest plus capital repayment, plus 32,000 Dhs annual maintenance charges and agents costs.

now, offset this against the gross rental income, and factor in a say a small 10% reduction in value.

If anyone could show me a calulation that would prove this to be an excellent investment, i would be interested to see this.

As regards "off plan investments" its interesting that Nakheel has shelved all future building projects (commercial and residential) and no further developments will take place until further notice.

I would bet DP's will follow suit at some point.

As regards "off plan investments" its interesting that Nakheel has shelved all future building projects (commercial and residential) and no further developments will take place until further notice.

I haven't heard this...what about the 1km tower is that also not going to be done?

"If anyone could show me a calulation that would prove this to be an excellent investment, i would be interested to see this."

Your calculation is still based on your core assumption that the prices will drop.

Here's an alternative calculation:

3m value, mortgage rate 6.75% which would mean monthly repayments of around 20,000dhs. Offset against annual rent of say 200,000dhs and you have a very handsome yield of 6.7%.

Add to that a year on year property increase of say 10% (which would be the correction I, and others, are referring to and is typical in a mature and growing property market) then you have an outstanding investment.

Assuming an exit strategy of 5 years then your property would be worth 4.8m and you would have had someone paying the majority of your mortgage for that 5 years. Not bad in my books.

Of course my calculation is based on a number of assumptions (mortgage rate, rent, property value increases) but that is how I see the market going over the next few years. More mature and less boom and bust.

Guess we have to agree to disagree!

And on Nakheel suspending all future projects - not sure what your source is for that but I am pretty sure that is not true. Are they scrapping the entire Waterfront development, for example?

I am going to agree with Phil.

Nakheel scrapping Waterfront, The 1km Tower (largest in the world), Trump Tower - do I need to carry on!

Why would you look at a property that is going to decrease in value than increase..... surly the investment matures !

I don't mean to harp on....but Arnie, you didn't tell us what you do...

I have heard all this before,
"The prices here in JBR where too much two years ago, it was 1,800"
"So you didn't you buy then?"
"Na - it was over priced!"
"So now, are you going to buy?"
"Na - It's over priced!"
"Its 2,500!"
I rest my case!

Do you carry out legal work as well part time.............. I'm looking to renew my visa, can I do the visa run! I'm on a UK passport!!

I'm sorry........................... but what have you been reading! Or maybe smoking, hang on can you hear that.......yes it's your mother ship calling you!!

I have been all over the web and I am happy to say that no one is suspending building or new projects in Dubai, I know that Emaar have just sold a contract to build....... a new tower in Downtown....and yes I know before anyone says anything............. there is too many.
Its called, (at the moment of writing this post) "plot 35". When I know more I will let you guys know!

So to say that Nakeel has shelved future projects......well I will let the rest of us decide that. Did you go to CityScape!?

Thanks Nick - good to finally have some intelligent and well thought-out posts on this topic!

It's pretty easy to grasp the basic concepts, yet some have displayed remarkable ignorance (to say Dubai's situation has nothing to do with oil being a particularly shocking example of a lack of understanding).

Anyway I'm sure the property price debate will rage for a while and it will be interesting to see what happens. I'll say again that I reckon Abu Dhabi is the place to invest - it's where Dubai was 5/6 years ago so prices are lower at the moment hence there is much more growth potential; it is doing things differently from Dubai (see Plan 2030); it has stronger economic fundamentals than Dubai; it is massively under-supplied and will be until at least 2011/12 (so clearly not "running parallel" to Dubai as Arnie again erroneously suggests); it is in less of a rush than Dubai as it's oil will last for much longer hence higher quality construction and well-planned developments (hopefully!).

NickTheGreek wrote:As regards "off plan investments" its interesting that Nakheel has shelved all future building projects (commercial and residential) and no further developments will take place until further notice.

I haven't heard this...what about the 1km tower is that also not going to be done?

Are you sure about that? What about Dubai waterfront?

Hey Bedro...........I just want to make sure that you understand that, the comment about Nakheel was not from me, if you read the post above mine then you will see.

Phil, yes I can see that AD is going to correct way to develop everything, there is still a huge housing shortage at the moment, AD is a good investment, at the moment people argue that its a better investment than Dubai, and that its a quicker market to flip, personally and this is only my opinion AD is more of a long term investment, as the capital growth would be more, as AD are adding something else to the Emirate, besides going out on a Friday all day drinking binge !!

But here I have seen so many people selling Remraam by Mizin, I must be offered this development 5 times a day!! people and there next payments!!!

Very interesting facts and figures, but.. to make it simple.. nobody is buying unless they get a bargain..most sellers wont sell at the prices buyers want to offer, and even when getting a bargain, the banks wont readily offer the finance. And rental prices are still rising..

What about Ajman, how does it look like as an investment right now?

People will probably hold back buying at least for a while till things stabilize.

john smith wrote:Arnie has been saying the same thing for at least a year. During which time, property prices have pretty much doubled.

Thanks for your insight.

Along with many other experts over several years.
If you keep saying that the market is going to crash, eventually you will get it right, and I thnk that Arnie's wish has finally come true.
The irony is that it was the gobal crisis, and not internal factors that have caused the Dubai 'crash' and Arnie can now take advantage of some bargain GBP stock prices using his US$$$.
Arnie, you will need to go back to your old avatar, but you will now have a chest of diamonds instead of gold coins.
Nothing is selling at the moment which would normally lead to a drop in prices. This is yet to materialise, but it will be a lot clearer in a few months when next stage payments are due.
Sales were being driven by the speculators who have vanished, but rents are being driven by the end user, and the lack of rent supply vs demand is unlikely to change dramatically any time soon. Rents and sale prices are at odds with each other rather than in sych as Arnie suggests.
But as soon as the global market recovers, which I think will be sooner rather than later, we can go back to waiting for the real Dubai crash.. the one that it does all by itself without any help from abroad.

Good post!

As for Nakheel cancelling projects, they are continuing with the existing planned and approved projects such as Waterfront, Palm Deira(dumb project) and Al Fardan etc., but they are holding back on any new developments that are still in the concept stage.

Despite the impending implosion, it is unlikely that we will see a dramatic change in the reantal prices as the new rules regarding sharing of properties is forcing many companies (as it is they who tend to overload premises with staff in order to reduce overhead) are now renting the new stuff at outrageous prices due to forced neccessity.

A 1 bedroom apartment in International City now demands a rent of 80,000Dhs and a company will expect to put 6 staff in what is little more than a badly built broom cupboard. What will Municipality do next? 1 person per room? All batchelors (labour or professional) will be forced to live in labour camps and single professional women will be forced to live in compounds surrounded by barbed wire...sounds like Saudi Arabia!



Knight