Dubai on the Upturn?

The recent instability in nearby Arab countries is proving beneficial to Dubai as it’s increasingly being seen as a safe haven within this region.

Dubai enjoys political stability, an open economy, and as such the Department of Economic Development has said it is seeing increased interest from businesses and recorded a 17% growth in licenses granted in 2010 which followed cuts in minimum capital requirements. Citigroup is also forecasting growth of up to 4% in 2011 with 6% in 2012.

This growth is most easily seen in the airports and hotels. Passenger numbers passing through the international airport in January rose by 10% year-on-year. International freight volumes rose by 3.9%.

Hotel occupancy is up to 81% even though there are new hotels opening all the time. Some of this is probably due to the unrest as room occupancy in Beirut and Cairo fell by 40% in January and February, while Bahrain's rates fell by 20% in February.

This newfound optimism is also spreading to the property market and the current abundance of empty residential and commercial property is attracting many new arrivals, not least because of the preferential leasing rates being offered.

At the moment the property regulator is reviewing units planned for completion up until 2016; trying to fit supply to demand, while estate agents say that the numbers of transactions are increasing as interest from North Africa in particular shows strong growth.

However some experts believe the long-term picture remains uncertain due to the political instability in the region. There is the worry that some investors may view Abu Dhabi and Mumbai as offering greater opportunities for longer term gains.

Dubai Property Victims: the Sad Story of 29 Boulevard

It's been a while since we posted a Dubai disaster story, but following the lead of the Indian TV station NDTV we thought we'd do a little digging.

NDTV's report is a bit like the one shown on British television not that long ago, an episode of the program Homes from Hell dedicated solely to the tragic tales of people who have paid thousands of pounds dollars and euros towards Dubai properties that are still no more than rotting foundations, and how, because the market developed so rapidly, the legal system still has nothing governing off plan purchases, and so there is very little that those affected can do but wait.

The NDTV report focuses on the property 29 Boulevard, a prestigious skyscraper project designed by New York architect Frank Williams and to be built near the now completed Burj Khalifa, the tallest building in the world. 100 people camped outside the Emaar offices to bag a good unit in the development, according to the NDTV report. The property has never got any further than its foundations, which are "rotting" according to NDTV.

“It’s really a disaster, the situation in Dubai,” said Silvia Turrin, a real estate agent who bought into the development, and has been unable to get her money back out. “It’s not like in Western countries. It’s very difficult to exit here if there’s a problem. And we’ll never get our money back, but now we’re stuck dealing with this hole.”

The lack of legal framework is allowing Emaar to hold onto people's down payments of up to 80%, despite failing to deliver on the project.

In a statement, Emaar acknowledged that 29 Boulevard was still “under construction” but said that it upheld transparency standards and had “taken several proactive measures to address the concerns of investors on developments that are in the pipeline.”

As we know, 29 Boulevard is far from being an isolated case, the ITV program covered dozens of couples and buyers trapped paying off loans for payments made on properties they look unlikely to ever receive.

It is ironic that Dubai's legal system is strong enough to prevent people from walking away from loans for fear of being jailed, but unable to force developers to honour contracts.

But we know all this. However, according to the NDTV report vacancy rates in Dubai are still rising. This flies in the face of a recent report by Dubai investor newsletter Arabian Money, which said vacancy rates fell over the summer. It is obviously counting a different figure for total housing stock, and potentially new supply as well, which no one really has a handle on, again this is down to the legal systems.

If one good thing has come out of all this it is that buyers are doing more digging than ever before. Checking laws, checking the season to make sure they will not be holidaying in a baron landscape off season, and checking planning permission, developer status, in short: checking everything they should be checking.

Dubai Property: The Good the Bad and the Bare Naked Truth

There is a lot of hosh and poffel being talked about the Dubai property market at the moment. According to Colliers International prices were 2% higher in the first quarter of this year compared to last year, the 4% quarterly increase was the third consecutive growth recorded by the firm. Echoing Colliers findings of a market currently stabilising, Asteco said that prices were flat in the second quarter compared to the first.

But then comes a cold stark report in Bloomberg of a barren market with insufficient sales to allow buyers to gauge prices. If you ask me this is the most realistic story, and I am sure anyone who watched the recent Homes from Hell Dubai Dreams program on ITV will be of the same opinion.

Let us not forget that £50 billion worth of construction is on hold in Dubai, and that several of Dubai's largest developers are still juggling huge debts that could yet be defaulted. At a time when French leasebacks giving returns of 4% max are more popular than off plan properties capable of returning twice that, because investors just don't want to take any risk, it is hard to see sales increasing in such a volatile market.

Dubai property prices have fallen a reported 50% since the start of the downturn, but in reality that may only tell a fraction of the story; if a property is only worth what someone is willing to pay for it then how much is a property worth that no one wants?

Further, how much is a property worth that has views on 1-4 sides of unfinished foundations and uncompleted towers?

What's worse is I can't even see any hope in Dubai's future. Okay, if sales do increase on the towers that are complete or being completed and the market verifiably stabilises, then new developers will undoubtedly want to take over the uncompleted ones and get them up and going ready for the growth cycle. It is worth that initial sales spurt will come from that I can't envisage. Answers on a postcard, or in the comments, whichever is easier.

Dubai World Restructuring Won’t Affect Property Market – Yeah Right!

OMG I nearly chocked on my coffee for trying not to laugh at this statement: "[the Dubai World debt restructuring] will have no significance [on the real estate sector] because restructuring is a normal word."

The statement comes from one Abdul Majeed Ismail Al Fahim, chairman of Dubai Pearl, speaking to Arabian Business.

He is right; restructuring is a normal word, and one which has been used so much in the last 12 - 18 months that it has almost become white noise in the global-economic newsroom. So, if this had simply been a case of Dubai World "restructuring" its debt then yes, the negative effect may well have been minimal.

That is: if it hadn't been made public that Dubai World had been forced to ask its creditors to postpone its debts, before there was any talk of the word "restructuring". But there was, and because there was we analysts have been able to fill in the blanks and have done so in national newspapers from Arabia to Zimbabwe (excuse the potential for a slight exaggeration there).

The real story goes: state-owned Dubai World is financially incapable of honouring its debts, and the real financial powerhouse of the Emirates (A.K.A Dubai’s rich uncle) refused to bail it out any longer, so it was forced into its current situation. Now the world looks on to see how much of a lesson the rich uncle wants to teach its easily led nephew.

Because of the way the story unfolded this is almost certain to have a negative impact on the property market. After shedding almost 50% in less than a year, Dubai property prices rose 7% in the 3rd quarter according to Colliers international. But one of the market’s biggest potential obstacles was always going to be residual negativity about the crash.

This had obviously began to fade as prices started to rise, but the Dubai World fiasco is bound to set back international sentiment by reminding us all just how much money fell into the Dubai pit never to be seen again.

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UAE and Dubai Property Markets Stabilising

According to new research by the Landmark Advisory, one of the largest real estate investment consultancies in the Emirates, property prices in the UAE and Dubai are starting to stabilise.

According to the firm there was even a moderate 7% increase in the prices of Dubai villas. It said that the supply and demand ratio for villas was pretty balanced and forecast stability on the price of villas in the short-term. "If investor confidence and inventories are stabilizing, then we may have possibly reached a price floor for villas," Commented Jesse Downs, director of research and advisory services for the firm.

Unfortunately the same cannot be said of Dubai apartments, though apartment prices declined just 3% in Q3 after a decline of 16% in the second quarter, and much bigger falls in previous quarters. Explaining the reasons behind this, Ms. Downs said: "Apartment inventories remain stable, with the majority of sellers holding prices, and because many distressed sales that were available over the past 3-6 months are no longer available."

This report by Landmark Advisory comes just days after Jones Lang la Salle released a massive report, highlighting Dubai and Abu Dhabi as having the best long term investment potential in the entire Middle East and North Africa region. This was based on the forecast of increasing businesses renting the cheap office space in the UAE, and the incoming staff providing long term high yield lets to residential property owners -- what it called a change of mindset for the industry.

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Conflicting Reports on the Future of Dubai Property Market

The United Arab Emirates -- and one of the world's -- most talked about property markets, Dubai is also one of the world's hardest to make forecasts about.

Almost every week a new research report is issued with conflicting data about what property prices are likely to do in the near and distant future.

This week a study by JP Morgan found that there would be almost 30,000 unsold units in the emirate by the end of this year. While another study by Jones Lang La Salle said that the market was stabilising, with the quarterly decline now slowed to 6%. Jones Lang La Salle are also forecasting growth in the market in 2011.

Earlier this month, one of the Dubai property market's staunchest advocates wrote a surprising article on how the Dubai market, where prices are now almost 50% lower than they were a year ago may have seen enough falls to call bottom.

He tempered this however, by saying that unless Dubai property could reinvent itself to be more attractive to lifestyle buyers, it may never be the investment hot-spot it once was.

My friend Frank Crowley, director of overseas property specialist Azure Overseas agrees with Jones Lang La Salle, he believes that growth will return to the market in 2011. He said:

"Dubai's biggest problem will be the complete loss of confidence in the market, with the volume of unsold units and unfinished developments a close second.

"The over-supply should slowly be rectified over the next year and a half with people buying as bargains become available to hold until growth returns whenever that may be. And then the negativity should all be forgotten about by 2011, at which point the sheer build quality and prestige of the developments will once again attract global buyers, who will also find the low prices a major attraction."

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