Friday, January 20, 2006

Thoughts & impressions.

Mrs Seabee and I lived in Dubai from 1977 to 1984, in fact it's where we first met. We weren't Mr & Mrs Seabee, we had both come to Dubai to work.

We had a few holidays back here since we left and when the government decided that foreigners could buy property we decided to do just that and to move back. Before the new property rule of course you could only get a residence visa by finding a job and the employer being your sponsor. Now the visa comes with the property.

It's been an interesting exercise, one which a lot more people will go through as the huge number of new properties are handed over. There's talk too of northern Europeans retiring here instead of places like Spain. So I'll write my thoughts and impressions, the hurdles we have to jump, the problems, the easy bits. Maybe they'll help someone one day.

We arrived in Dubai at about 2.40am. We arrived and two of our three suitcases arrived. I cut a lonely figure watching the carousel chug round and round with the same three or four bags on it, none of them ours. I found an airport worker and asked if any more were coming. Some hope! What you don’t need after nearly 24 hours of traveling and a few minutes catnapping is to have to try to think clearly to explain to people who speak English as a second or third language that your bag is missing, find the right bar code for the missing bag rather than the two which did arrive, describe the bag – which inevitably looks nothing like any shown on the chart they give you – fill in forms, remember which hotel you’re booked into, find the phone number of the hotel.

Surprisingly, they were helpful (maybe they’ve learned that tired, irritable passengers are dangerous if you don’t handle them with care) checked the computer, traced the bag and found it had missed the connecting flight and was still in Singapore. We’d booked two nights in the hotel and planned a meeting to complete the ownership transfer of the apartment later the day we arrived and move into it the following day. The bag missing was the one with the inflatable mattress, pump, pillows and sheets which we needed when we moved into the apartment. Naturally. Murphy’s Law.

At the airport Mrs Seabee bought a SIM card so that we were contactable. We finally staggered out of the airport into the very warm very humid night air and another surprise greeted us, an Emirati female taxi driver. At four in the morning the roads are almost empty and speed limits can be totally ignored so we made good time to the hotel.(He said, tongue firmly in cheek).

We managed a few hours much-needed sleep before our 3pm meeting with the developer to complete the paperwork transferring the apartment to our names. A little background – some areas outside the city of Dubai have been declared as zones in which foreigners may buy freehold property, a first for the Gulf. It’s known as New Dubai and is actually many times bigger than the city of Dubai itself. Three Master Developers, government owned, are responsible for the various vast developments. They erect some of the buildings themselves, selling other plots of land within the development area to outside developers. In turn, investors from around the Gulf, the wider Arab world and internationally have bought villas and apartments off the plan with a ten or twenty percent deposit, then on-sold at a huge premium before the next stage payment is due. Multi-billion dollar developments have sold out totally within, literally, hours of being put on sale.

The area we bought in, Dubai Marina, is one of the smaller developments, but even so is planned to have 200 towers built around a man-made marina nearly 4 kilometres long with outlets to the Gulf at either end. Population of Dubai Marina will probably be around 100,000 when it's finished. The Master Developer created the master plan, with building controls, what could go where etc, built the marina itself, the infrastructure and what’s known as Phase 1, which has six high-rise towers and a range of restaurants and shops, parking space and very nice landscaping. The rest of the plots have been sold to other developers to come up with their own tower designs, erect the towers and sell the apartments.

Back to the story – the Master Developer sold our plot to the developer ETA Star who built a seven storey block with sixty-one one, two and three bedroom apartments. A company called 32Group bought half the apartments off the plan and we bought from them. Dubai Lands Department is still being formed and until the whole legal thing is in place the system is that the developer does the paperwork and keeps a register of owners. In due course these registers will be passed on to the Lands Department which will issue Title Deeds. We had to go to the developer ETA Star with the then owner 32Group so that they could transfer ownership to us and we could be registered with ETA Star as the owners. It actually all went smoothly and was done quickly and efficiently. The last time we’d seen the building it was a chaotic building site, not much more than raw concrete. So we asked for someone to drive us to the apartment to show us around, how things worked, where the car park was and all the other boring, vital stuff.

There are horror stories and rumours about the standard of building in Dubai, but we were pleasantly surprised because most of our building was actually better than we expected, especially the common areas. The common garden area isn’t huge but it’s very nicely landscaped, with lawn, gardens, date palms, water features. There’s an open-air pool at basement level, a very well equipped large gym, duplicate male and female changing rooms/showers/saunas/steam baths/spa baths. We have underground parking with reserved spaces for each apartment, electronic security systems with smart-cards, a video visitor entry system, twenty-four hour security guard/concierge, permanent maintenance and cleaning staff, a team of gardeners comes once a week to maintain not only the public areas, they also look after our private garden. We’re on the ground floor, so instead of balconies we have a private garden and patios.

We checked it all out, met the staff and headed back to our hotel just as the peak-hour traffic started. That sure was different from the old days in Dubai. Then the population was 250,000, now it’s a million more than that and the traffic has increased accordingly. Over 500,000 vehicles are registered in Dubai and half of them, according to surveys, are on the road commuting between Dubai and Sharjah each morning and evening. Sharjah is the adjoining emirate and the city of Sharjah is only about 10 kilometres from Dubai city. Rents are much cheaper there so a large part of Dubai’s workforce lives in Sharjah and commutes.

The following day we picked up the hire car, checked out of the hotel and moved into the apartment. Normally the electricity and water would be disconnected at this stage and we couldn’t apply for connection in our names until we had our Residence Visa and that was estimated to take up to a month. However, ETA Star kindly said they’d use their influence to keep the electricity and water connected, have it transferred to our names from the date we took over ownership and split the bill accordingly. So that was one really major potential headache dealt with.

The missing bag was still just that, missing. So we drove to our local shopping mall – and that’s a story in itself, an astonishing place. In the hypermarket we found an inflatable double mattress and pump, a couple of pillows, pillowcases and sheets, so we were all set. After we’d pumped up the mattress the airport missing luggage office called us to say the bag had arrived and they’d courier it to us straight away. We’re in the part of Dubai Marina which is still a building site, no road names, no landmarks and no-one knows it. So the courier got lost, but after a few more calls to the mobile he eventually arrived. We deflated the new mattress, took it and the pump back to the hypermarket and somehow talked them into taking it back and returning our money.

And so to bed.

5 comments:

Canuck said...

SeaBee.....

Reading through "Thoughts & Impressions" was truly enjoyable and enlightening.

But I have a few questions and thoughts which I'd like to share with you.

First off....am I right in saying that the apartment you've bought is not freehold but rather leasehold for 99 years? That means you don't have absolute ownership of the property, correct? So even if the Dubai Lands Department is formed, the property will not be registered in your name as owner....you will be the lessee, but the owner of the property will be the Master Developer. Please correct me if I am wrong.

Second.....As you said, the plot was sold by the Master Developer to ETA who sold it to 32Group who then sold the apartment to you. So, in effect, the apartment has changed hands thrice, right? Along the way, the price of the apartment may have doubled and then quadrupled. Again, correct me if I am wrong, but you may have paid 2 or 4 times the original price that ETA Star sold to 32Group.

Third.....and this is something I am trying to wrap my brain around. What happens if several years from now you want to sell your apartment at a time when property prices in Dubai are in the doldrums? Whom are you going to sell the property to....on the open market or back to ETA Star? If (and I suspect this will be the case) you have to sell it back to ETA Star, then at what price will you sell it back to them? Market price? If so, is there any precedent for a Developer having bought a property back at market price?

If, on the other hand, you have to sell the apartment back to ETA Star, what will ETA give you for it....the price you paid to 32Group or the price 32Group paid to ETA Star??

I'd really appreciate your response to my questions above, because I am trying to understand the rush of people buying property in Dubai without first doing some basic "what-if" analyses for possible future events.

Seabee said...

Hi Canuck,

We did plenty of research and plenty of 'what if'. We have property investments in several different countries, so we're used to doing the groundwork and going in with eyes wide open.

First point: No, the apartment is freehold, not leasehold. The Dubai and UAE property laws are still being finalised, but the promise of freehold is how billions of $ worth of property has been sold. To change it now to leasehold, with so much international money having been invested, would cause the market to collapse and confidence in Dubai to disappear. When the law is passed we will be the registered owners, with the Title Deed in our names.

Second point: the apartment was bought off the plan by 32Group, who sold it to us, so there have been two owners. Obviously we paid more than the original price - prices had gone up over the more than two years between when 32Group bought it and when they sold it to us. That's normal property dealing of course. (For example, our house in Australia quadrupled in value in six years).
The price we paid for the apartment was a bit less than market value at the time we bought it.

Third point: when we want to sell we'll sell on the open market. There's no requirement to sell it back to ETA and I'm not aware of any developer trying that on. If ETA wanted to buy it they'd have to pay market price.
What happens if the market's in the doldrums when we want to sell? The same as anywhere else, we don't sell in a flat market. However, if it collapses forever - and no market has ever done that...with Dubai's property market being so new you don't have market history to research as you do elsewhere. We took all that into account when we decided to move back and have budgeted for a loss as worse case scenario. We were prepared to do that and treat our time in Dubai as an expensive holiday. But that's really a worse case scenario that's highly unlikely. In reality we won't be prepared to sell at anything less than a profit.
You're right about people rushing in with their eyes closed. It's particularly so in this area, but it happens around the rest of the world too. You see plenty of mortgagee sales in various countries, where the buyer overstretched and the bank foreclosed.

Matt said...

SeaBee....

Can you tell me are you required to pay any property taxes, land transfer taxes, annual maintenance fees?

My wife and I are contemplating a move to Dubai due to the new freehold opportunities and the residency permit. I am astounded at how bad the bureaucracy is - particularly the endless paper work.

Finally, I have also heard very bad things regarding the traffic - can you comment on this. Thanks,great blog!

Seabee said...

Maintenence fees apply and they vary from property to property.It's the same overseas of course - in Australia it's called Body Corporate Fees, and Sinking Funds.
Check out the final, total price before signing anything. There are often agents fees & transfer fees added to the price quoted.
The traffic is bad - but then it's bad in most cities around the world. If you live in a big city that's one of the things you have to put up with. At least the roads are being improved/widened/added to and there are new bridges planned to cross the Creek. The big problem is really lack of public transport, there are only taxis and some buses. A rail system is being built from scratch but it'll obviously take a while to get it up and running.

Dubai Property said...

I think the ever growing demand for prime property has also engulfed the emirates and in the last few years, prime locations in the emirates like Dubai have seen a real estate boom. Considering that Dubai was a highly competitive but low priced market, this real estate boom is the last thing that the government wants. A lot of experts feel that Dubai is heading pretty much the same way where some of the Asian markets have headed in the past, towards overpricing. The reason for this is pretty simple. There is not enough supply to meet the demand in Dubai.