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ok
everyone and anyone....some general questions about property in dubai...
i am staying at springs...and the landlord is soon going to spring me with a hefty rent increase amounting to 100 k a year at the least...
so here i am thinking why pay him when i can pay myself!!...if i get a loan and get financing and buy a property...what happens...what should i watch out for...or if i should wait...lemme highlight my concerns in bulletpoint...now if i got this right...arniegang...your work is related to real estate...any opinions would be really appreciated!!!....just thinking out loud...
1>if i get a 90% financing from a bank...(it really doesnt mean 90% does it?...coz you have to fork out 30 % in actuality?...right or wrong?...any banks or financials you guys recommend?)

2>if i purchase a property...does it mean i really do own it if it is freehold?...as in the title deed exsists and is truely mine?

3>property boom...bursting of the bubble...right time to buy...i am really confused...there are so many properties...especially apprtments stated to be released soon into the market...why arnt the landlords afraid?...whats really going on...?...

4>a friend of mine just bought a prop in the marina...and is yet to get possession...i heard that unless you pay a certain sum...thats in actuality the 30% i was referring to...you do not get the keys...(poor chap is still staying with us...!!...it was supposed to have been completed 6 months ago!!)

and basically i hate paying landlords!!

should i wait...whats the groundwork and what properties do you think are worth a look at...if i am looking at a 2 bedroom condo?


thanks all!!!

Blimey Cons i'll have a go for you, but please remember, this is only my opinion.

1. i profess to not knowing much about finance in UAE a/ because i dont borrow money 2 if i did it would be in the UK @ 4.5 %. My understanding it is currently hovering around 6% in UAE. The 90% is 90% Cons but....... it depends on your status ie GCC National etc. My understand is "ex pats" can only borrow upto a maximum of 70% of purchase price. However i hear this is changing.

2. There has been much discussion on the subject of "freehold" in these forums and elsewhere. I can only give you my definition and what is actually written into "my contract with Emaar".

Basically Freehold doesnt exist in the UAE for non nationals. The reason for this is that there is no "property register" and no means to identify or file "the property deeds".

However, the Freehold Law has just been passed subject to ammendments and input from the legal eagles. It should be fully "rolled out" later this year.

Currently the title deeds are owned by the developer, in my case Emaar. Only selected developers will be allowed to "pass" the title over the the owner. Currently there are 3 Emmar, Nakheel and Damac.

In my contract the proviso is quite clear regarding the freehold and title, in that it will be passed to me, when the law is in place to allow it.


3. The boom, ahhhhhhhhhhhh the $64000 question. It is clearly my opinion that the price has reached its peak. Any ecomomy can only sustain a given level of "boom"before it adversely affects inflation. In terms of rent this has already happened.

People say "ahh well but what about the rents" , this is only a direct result of the property boom. Before 2002 as you all know Dubai's economy was fairly stable stable in terms of rental. Then the sale of properties started Jan 2002 with phase 1 Marina with 99 year leases. Then in that May "freehold" was announced.

This situation was bound to effect the rental market as in any country where there has been an established property market. This was obviously new for Dubai as prior to 2002 there was NO property market.

So now we are back to the question do i buy or not? Well it depends on your circumstances and how you view your future in Dubai, and why you actually want to own.

Take me for example, bought at the outset when they almost gave them away, with no intention of making a buck purely as a holiday and retirement pad. To me its value is meaningless, whether it be 100 or 100000 Dhs. It will only ever be a paper loss or a paper gain.

If you only intend hanging around a couple of years - probably best forget it.

If you see your long term future in DXB, then i would say buy.

If you think you will make a fast buck - forget it.

However the concept of using your "housing allowance" is an interesting one.

I would have said if you spend the next 3/4 years in Dubai and get a 100k Dhs allowance, i would seriously seriously consider it. Lets say for example a 2 bed appt costing 1.5 million Dhs. @ 70% mortgage you have to find 450k deposit and on 90 % you need 150k.

After adding on 6% interest in year 1, you need to fund the monthly payments. It is a very hard year 1 !!! Years 2 and beyond you obviously only need to "service" the mortgage out of your housing allowance.

In this i have put the basics, obviously i dont know how much you earn, how much savings and how much allowance you get.

4. i dont understand No 4 cons, can you be more precise please.


My overall opinion Cons, is if you get 100-120k housing allowance, then i would seriously consider buying now. Even when the market drops (if it drops) you will have in effect used your employers allowance to subsidise that drop.

At the end of the day it is no different to renting, you live there a year and you loose it. So if you buy say a 2 bed apparatment in the Marina for 1.2 million and the market drops 10% in year one you are no worse off than renting for a year and losing 120k Dhs. But as the money wasnt your you have nothing to loose and everything to gain if the market remains stable or even goes up a bit.

Hope this help put things in perspective for you buddy.

(sorry no time to spell check)

eeeekkkkkkkk did i really just type that much

arnie
thanks so much for answering along the lines of what exactly was going thru my mind...well i am a novice at this...so your input is highly valued...ok i must admit i do not see myself living in dubai 10 years down the line...simply bcoz i will be migrating to canada...but the idea of dubai appeals more and more...on the earning point of view...well as you so correctly pointed out...what have i got to lose on the paying rent to another person- point of view...coz the money was never really mine...i guess the immidiate question i need to ask myself...is...if i should wait till next year...or wait till my lease comes up in august and jump right in...
i know there have been similar topics about this and i have used the "search" function ....but just wanted to get more detailed info....thanks a ton for taking time to write such a comprehensive breakdown!!!....much appreciated and the frist drinks on me..when we meet...!!
PS: point number 4...thats why i wanted to get an informed opinion...instead of urban legends that dont have a complete explanation!!
cheers again!!
me

Your most welcome Cons ,glad to offer advice.

If August buddy, and your are looking at another 3/4/5 years, i would give it serious serious consideration.

Ohhhh and another note. When the new property law come into being, my guess is in the short term there will be another "mini boom", that said if it does then over the medium term if you considered buying now, any loss will be absorbed in the short term ( if that makes sense).

The reason for a mini boom = confidence in the market.

yes does makes sense...i am thinking of getting into it with a friend...so our housing allowances would definately cover the 110 k per annum...ok for me the logic being...i plan on staying here at least for 3 years if not more....
year 1...get loan...start morgage...starve myself ...

year 2...pay morgage...top up morgage for interest...

year 3...do the same as year 2

year 4 or 5...if the market is good...sell and run with the money ...or if i stay...then continue paying the morgage...

the thing that i did realise is...the fact that its a 1.2 million investment daunts a lot of ppl...but if you break it down...and if you have can "resell" it or retain it...there is no losing proposition...unless there is a war/or the freehold or property laws are drastically changed and do not take effect!!


really all this is a RANT at landlords who have thier heads in another zone altogeather....somewhere where the sun dont shine!!

Just done an example costing for you Cons

2 bed Appt Marina 1.2 million Dhs

@ 90% mortgage

Deposit 10% = 120,000 Dhs

Balance 1.080000.00 Dhs over 20 years @ 6% pa interest
on a Repayment type mortgage with interest and capital repayment

Monthy cost = Interest 5400 Dhs
Capital Repayment 4500 Dhs


Total monthly cost = 9900 Dhs


sorted

Interesting read thank you both, good luck in whatever you decide C

constantine wrote:everyone and anyone....some general questions about property in dubai...
i am staying at springs...and the landlord is soon going to spring me with a hefty rent increase amounting to 100 k a year at the least...

1>if i get a 90% financing from a bank...(it really doesnt mean 90% does it?...coz you have to fork out 30 % in actuality?...right or wrong?...any banks or financials you guys recommend?)

3>property boom...bursting of the bubble...right time to buy...i am really confused...there are so many properties...especially apprtments stated to be released soon into the market...why arnt the landlords afraid?...whats really going on...?...

If you're getting a rent allowance and you're allowed to put that towards a mortgage instead, I would have no hesitation in buying a property - as long as it was in my name, not the company's.

Some banks offer 90% finance but usually on the original off the plan price. That may be why despite having 90% finance, you still end up paying 30% of the purchase price. For example...

1 bdrm apartment in the Greens OP = 600,000 dhs
90% finance = 540,000 dhs
Purchase price now = 800,000 dhs
You have to pay 800k - 540k = 260,000 dhs (which is actually 32.5%).

That is beginning to change. RAK bank was offering 80% mortgage on valuation at time of sale (not purchase price) last year. But the valuations are likely to be significantly lower than the selling price.

FGB (First Gulf Bank) were offering 100% finance on a property yet to be built - I think in Jumeirah Lakes.

I think ADCB and Tamweel do 90% mortgages.

There's a monthly magazine here called MoneyWorks which has a table of banks, mortgage rates and percentages.

With the recent property law announcement, it's expected that mortgages will become more competitive.

Price bubble? Again, I think the property law news a couple of weeks ago prompted a bit of a spike - from what I hear the Greens and Springs especially have shot up both for rentals and purchase. While demand is higher than supply, prices will keep rising. And I'm guessing supply won't rise above demand until late 2007/early 2008 when a lot of big projects are completed. There may be a slowdown in sales before then as people realise this and so prices may level off or even drop. Or they may not .

I wouldn't be rushing to buy now with the expectation of making significant capital gains, but to save rent money and (maybe) for long term asset value. Or for cashflow by renting it out.

By the way, even if you're only here a couple of years, you don't have to sell it. You could rent it out and cover your mortgage that way.

Thanks Sharewadi

A really useful and informative post

The lastest news on the property market is that Tamweel are offering 90% morgages on the market value (rather than off-the-plan value) of properties at Arabian Ranches.
It is promising that the banks are slowly trusting the market.
Const, I read that you were after an apartment. You can read in other posts that there is a lot of speculation about apartment prices dropping. This is because a large number of developments are due for completion within the next year or 2 and you might be able to find a bargain (If you are nice to Arnie, he might throw a few crumbs your way!).
By the sounds of it, you want something to move into as soon as your lease expires. The premiums are very high at the moment and this would be risky. But if you are staying long term, it is worth considering.
Hey Arnie,
If I owned an apartment in the Marina, would now be a good time to sell?, before the bubble bursts.

thanks arnie and benwj and sharewadi....
very valuable info...will definately help me towards deciding...!!
cheers
me

Benwj

If you are going to dump off an appartment in the Marina, i would deffo do it ASAP, or double deffo before JBR completes.

arniegang wrote:eeeekkkkkkkk did i really just type that much

I DO really I appreciate the info...THNKS ARNIE..how on earth a relative just bought a condo unit without knowing such circumstances!!perhaps shes settling for good..
___________________________

HABIT IS SECOND NATURE

arniegang wrote:If you are going to dump off an appartment in the Marina, i would deffo do it ASAP, or double deffo before JBR completes.

Personally, my opinion is that it'd be worth hanging on a bit longer yet. I understand that as Dubai Marina is an Emaar development, it will be one of the designated areas for freehold ownership. When the official word is out on that, banks will be more flexible with mortgages - putting apartments within reach of more people, buyers will also feel more confident.

I notice that Emaar Financial Services just announced a AED75m property fund (targeted return didn't impress me though) so I guess they'll be looking for properties to buy, and it sounds like other institutions will set up similar funds. Of course, they will be looking to buy properties on the cheap.

There's still a shortage of accommodation for rent especially 1 bdrms and if the Greens are selling 1 bdrms for 800k to 900k at the moment, surely the Marina 1 bdrms are worth that and more? I know where I'd prefer to live .

Take your point about JBR but that's likely to cater to the tourist/short term visitor market more than the residential/long-term stayers no? So it may not have such a big effect on prices of other apartments in Dubai Marina?

I read today that population growth is 7% in the UAE (or Dubai?). That's about 100,000 new residents in Dubai alone per year for the next few years rising to almost 150,000 new residents in 2010. Say a total of 600,000 new residents by then. Knock out two-thirds as workers in labor camps and other cheap accommodation. Even with Dubai Marina (40,000 apartments?), Discovery Gardens (5,000 apartments?), Springs, Ranches etc, will there be enough accommodation for another 200,000 people? Plus all the non-residents buying investment properties, holiday homes etc?

Numbers are fairly vague estimates/guesses of the top of my head so may be wildly wrong .

Oh, and I should add one more caveat. Most of the time I get it wrong when timing my investment buying or selling ...

Sorry Sharewadi im gonna have to disagree with you.

JBR by the end of this year/early 2007 will release 3500 appartments. That will basically "flood" the market and to an extent in my humble opinion devalue it.

Yes i know there will be an element of the "holiday home" scenareo, but currently as the majority are owned by speculators, on complettion they will DUMP them, i can assure you.

It will no doubt alter the balance between supply/demand.

The market has already slowed, you only have to look around at varios new developments, offering incentives like free cars, 50% down to complete etc.

When developers start offering goodies it sends signals, very clear signals.

arniegang wrote:The market has already slowed, you only have to look around at varios new developments, offering incentives like free cars, 50% down to complete etc.

When developers start offering goodies it sends signals, very clear signals.

Ah yes, I had noticed that. Hmmm....

They've been doing that for a while though - wasn't there somone a year ago giving away an Audi with each apartment?

I suppose the question is really whether 3500 apartments from JBR is a flood or a trickle. It sounds significant but when there's 2000 new people moving in to Dubai every week, that's what gives me pause for thought.

My gut feeling is that prices sound high now. But six months ago I was looking to buy something and didn't because I thought prices were high. The same apartments I looked at then are 20-25% more expensive now .

But how many of those 2000 people have a wallet with 1.2 million Dhs (minimum) in??

A property market exists on the ability of people being able to buy or borrow, it doesnt equate to how many people go through immigration.

arniegang wrote:But how many of those 2000 people have a wallet with 1.2 million Dhs (minimum) in??

Sure, not many . But they work for companies who pay rent, or they'll need to rent, or they'll get a mortgage. Well, a couple hundred might. The rest are going to live in Sharjah or labor camps I suppose

Great post guys...good that we have two sides here. Arnie - I am looking forward for your reply on the last post - because in my amateur opinion ...the new guys are going to have to stay somewhere and although they may not buy...they will rent out these places coming into the market.

I really would buy a villa/townhouse if my liquidity would allow it. Same as happened to Share wadi...Six months back (when I was liquid enough) there was word to hold it ...but now those properties have gone up by at least another 10%

AFG

The influx of expats doesnt make any difference to the market IMHO. You only have to look on here to see that thier allowances are not keeping up with inflation.

There is plenty of property available but its getting close to the point only the "upper etchelon" ie those in in the 30k Dhs plus bracket has the ability to rent.

Dubai is fast approaching pricing itself out of the employment market. Also, i think the future shift is going to lean towards the "holiday" rental market. I am already short term letting my appartment for 7000 Dhs a week .

If you notice in the other post, inflation is rockecting in Dubai. This trend in the short term, will only continue to rise.

For your average "grass roots expat" it will be time to say ta ta DXB in the next 24 months.

I think AFG you have to remember Dubai is a totally new market in terms of property ownership. Countries like the UK have had a "property market" for the last few hundred years.

Our experience is my "benchmark". Always remember the golden rule in this market "it can go down even quicker than it goes up". All the newbie wannabee's are gonna get their fingers well and truely burnt at some point.

Have to agree with Arnie. With the way inflation is going our company is seriously reconsidering its decision of having a hub in Dubai. The freezone attraction has been far overshadowed by the cost of posting quality staff here.

X

I heard that rents rockected off the richter scale in Jebel ali a few months ago. ?

arniegang wrote:X

I heard that rents rockected off the richter scale in Jebel ali a few months ago. ?

You heard correct Arnie. Suffice to say even though my company is building its own facility in the freezone the rent for the plot of dust that it will sit on could buy you a nice piece of Cuba.

Another point everyone should consider surrounding the links between property/expats is that on official figures the influx of expats over the last 2 years is heavilly weighted towards the construction industry.

Once the current batch of projects all come to an end around 2008, people have to think about who is going to rent all those properties currently occupied by engineers, architects, project managers, surveyors blah blah the list is endless.

Tourism is the ultimate goal and this was the vision of the late Shiek. This will come, but it wont require the same level of skill and "quality professions" that the construction industry requires.

Everyone thinks because countries like the UAE has a fast growing economy the trend will never cease. History tell us that is not the case. The dubai ecomomy will flourish, but in a different direction. Ulimately the construction workers will be replaced by waiters, bar tenders, Chefs, hotel and restaurant managers sadly none of whom will be getting 120k housing allowances and 20k salaries.

Why is it that Dubai for some reason never 'followed the rules' - when the properties were made available for freehold there was so much talk of rents dropping given that people would rather buy then rent. Then I know of tonnes properties being left empty but owners not reducing the rent - Simply makes no economic sense.

The cost of living has skyrocketed - yes, but not that many people leaving. Families are moving if required to Ajman, sharing their apts, sending kids and other non-working members back, cutting on food but not leaving. Do you really think they will leave in the next 2 years - if so then I guess that's Bye Bye to all the small business here...and won't that trigger another inflation - as employers will have to either entice by forking out more or just go out of the market. Which country (in recent history) had a similar situation, I would like to read a bit on the economic situation - excuse my ignorance (am still in 20's - past few years spent having and bringing up kids while working full-time and doing my MBA thru regular classes and the weekends taking care of Dad's business in which I have invested a bit - of course apart from that there's been an unsupportive husband by my side ).

I am trying to grasp the economic trend that's happening here - Thanks for your time.

AFG

I am no expert on Economy per se, but i will gladly share with you. You say Dubai breaks the rules. Wrong AFG it doesnt! Dubai is no different to any other economy that matures than any other.

I actually found your first paragraph most interesting. You state "there was so much talk". Strangely enough i have been to dubai more times than i can remember since 1999. I can remember also "there was so much talk" from Expats in the pub in the JBH slagging off the property market.

They were there all bleeting i know about Dubai this, and I know about that fek me they were tedious. They considered themself "eliteist", and many times i can remember them telling me what a stupid fool i was to put a deposit down on property.

"ahhhhhhhhh the shiek can take it away", "ahhh it wont come to anything" "ahh it will all go wrong" blah blah. Even now in this forum, people slag off construction quality blah blah. To be honest AFG, it gets right up my nose.

How many of those expats back then, and those in these forums had either the bottle, the cash or the forsight to purchase property in 2001/2002 would be bleeting now. I will tell you AFG - NONE. Why, because had they bought in the beginning, they would have made themselve buckets of cash. Take JBR and Phase 2 Marina, 2002 average price 400-550k Dhs, now same would be 900k-1.2 million.

I bet the one on here and back then had bought, do you really think they would still be slagging off. Of course not. Now, like back in 2001/2002 there is a level of non acceptance and bitter and twisted.

Moving on, i didn't wish to insinuate there would be a mass exodus in 2008, i merely suggested that period will be when most of the larger construction projects will start to finish. without more large scale projects there will be no work or little in that industry.

When i was referring to traditional propery markets, i was making a comparrison between the larger western economies. In the UK and most of Europe we had established markets while other western countries were still in the dark ages.

In particular i would cite North America. You must remember it really wasnt that long ago they were running about on horses shooting each other, drinking whiskey and living in Log Cabins.

Dubai is all about how quickly the economy can grow and what economy it can sustain. IMHO it is being escallated by wealth that is not sustainable. In addition as the economy grows, the population must grow with it. At the moment it isnt. This is why the cost of living will continue to spiral. Wages/income is not keeping up with the cost of living and therefore inflation will continue on the up.

Dubai is already becoming un-competative, as a freezone. This is why it is almost a forgone conclusion that VAT will be introduced sometime in 2007. I would hazzard a guess by 2015 (when the oil wells run dry) and the tourism is fully in place, Dubai will have no option but to consider taxation. With no sustainable income on an economy that has grown beyond all belief, the country cannot sustain the subsidies it curently enjoys.

For everyone to say there are no taxes in DXB, they are dillouded. The first true tax was introduced last year, its collected by DEWA and is a property tax. To supply services to a growing population requires more money than the government can subsidise. I believe this is only the thin end of the wedge.

Only time will tell, i may end up with egg on my face, i may not, who knows?

Excellent posts everyone - and this is always a hot topic of debate, whatever country you are talking about.
Unfortunately Arnie, I don't think you are going to end up with egg on your face and your predictions will, largely, come true.
Having no taxes is pretty much unsustainable in the long term, once the family silver (the oil) has been sold off.
I hear the VAT is to be introduced to cover the cost of free trade agreements with many other countries, but Arnie might remember better than me (as I wasn't born!), that VAT was first introduced into Britain for similar reasons, that being when it joined the EEC. Now VAT more than covers (I believe, but could be wrong) the costs of being in the European Union, and is one of the most important revenue gererators for the gorvernment.
So VAT, I would say, is the slow and slippery path towards income tax - and that would be when any mass exodus starts I would say.

Excellent posts - I really enjoyed the insights and questions of the contributers!

My view is that the fundamentals will always come home to roost - money can't, ultimately, be created out of nothing. 'Bubbles' where prices are bid up by speculators who saw what gains were made by previous investors, ultimately HAVE to burst. History is full of these 'bubbles' - the most recent one to burst is the so-called 'dot com' bubble.

A few economists (notably Roger Bootle in his book 'Money for Nothing') argue that the current global rise in property prices is also just bubble that will burst. He argues that making 'money for nothing' is just not sustainable... facts of life eventually catch up with society and there is a 'burst' of the bubble.

I have to say that I share Arnies assessment of the situation and would add that we need to see the rise in property prices in Dubai in the global context of silly prices being paid for property in the West. Those with property are benefiting from inflated property prices and those lucky enough to be property rich and who can extract the value, are looking for places to invest. The 'bubble' is being exported .. British investors for example are buying up property in Spain, Eastern Europe and now Dubai. This is largely fuelled by the older generation who have generated equity in their property.

But, and this is a big BUT, ultimately the rise in prices of property is an illusion that has been created artificially by lax lending in the West. The fuel for price rises in property is banks lending money to people to buy and these people bidding up the cost of property - take away people's ability to borrow 5 or 6 times their salary and property prices will begin to reflect the real state of the economy and bear a sensible relationship to what people actually earn.

The property bubble burst in the 90's in the UK, as it did in Tokyo and Hong Kong, and also NY - all places where property prices were rising 20% or more a year, but industrial growth, salaries etc were not growing at the same rate. What was growing at this rate was the amount of lending ... money/value was being generated out of thin air and this illusion is only temporary and ultimately hurts the ones holding the hot potato when the bubble bursts.

I agree with Roger Bootle that the property market globally is in a bubble at the moment.. interest rates are at historically low levels and this is fuelling the property markets.

The recent (last 10 years) in prices of property have resulted from a downturn in the values of stocks (shares) - as a result of global corrections to the 'bubble' of false values based on investor greed. This money has looked for alternative places to invest, and property has benefited. Ironically this has created a property bubble - but property has some intrinsic value, people do need somewhere to live/work etc - just as shares do have an intrinsic value based on the assets and earnings of companies.

Anyway - you will all be bored to death if I go into more macro-economic theory, so I'll stop there.

Bottom line - I wouldn't buy in Dubai at the moment, just like I wouldn't buy in the UK. It sticks in the throat to pay rent here and apparently get nothing from this - but the ultimate down side of borrowing to buy is the possibility of losing everything if you can't keep up repayments should interest rates rocket (and when that happens, negative equity means you lose the house and still have a debt!)

The nature of bubbles is that they burst. I believe we are in a bubble and it will burst. However, people have thought this for the past 5 years in the UK and many talk of a slow down/soft landing rather than a bursting of a bubble. I think that is just wishful thinking (no one really wants the bubble to burst except people who are out of the housing market waiting for prices to crash).

Time will tell...

Cheers,
Shafique

wow thanks guys....this post has become a wealth of information...interesting to note...that hong kong has recently started raising its property prices and rents by as much as 30%...they are hitting back hard and fast are after the SARS pheonomenon...shaf i think you have a very good point there about not being able to upkeep the repayments...perhaps i will invest my hard earned money in my motherland...india-goa- 3 bedroom villa with all the works- 70 thousand US!!...and i get the title deed!!