Sunday, June 28, 2009

Metro affecting property prices

There's another hint that Dubai's property market is edging towards some sanity, in a report in 'The National' this morning.

It seems that one of the factors taken into consideration in mature markets, proximity to transport links, is coming into play here.

If you look at property ads in other countries you'll see that if there's a nearby rail station, bus stop or freeway/motorway exit it will be included as a selling point.

In the same way, Dubai Metro stations are now beginning to have an effect on prices according to Landmark Properties.

They point to Jumeirah Lake Towers where they say that property very close to a Metro station attracts higher demand and about Dh50 per square foot more than comparable property further from the station. It doesn't sound a lot but on a 1,500 sq ft apartment it means a premium of Dh75,000.

There's also, incidentally, support for sceptics about the Metro who've been saying that even a short walk to a station won't be acceptable for Dubai residents. Landmark says that the higher demand is only for properties almost directly outside a station.

I think there are three problems the Metro will face; our unwillingness to walk any distance to a station, our unwillingness to stand around waiting for a bus to get to the station, and the slowness of the journey.

That's maybe something for another posting though, so back to the property issue.

There's also a general feeling expressed in 'The National' report that rents will be higher for properties near Metro stations, again reflecting what happens in mature markets.

That applies not only in New Dubai but also in the older areas such as Bur Dubai and Deira.

There's another interesting point in the report. Landmark Advisory say that in the first quarter of the year the average sale price for completed and nearly completed apartments and villas fell 34 per cent. Unfortunately it doesn't say which period that compares with.

The interesting part to me relates to the values. They say average residential sales prices are now at the level they were at the end of 2007.

I've expressed the opinion several times before about buyers losing money - it depends when they bought, what they paid and whether they sell at the bottom of the trough. There've been endless claims that everyone who's bought property has lost a packet, much of it gleeful, gloating that buyers were stupid and deserved their losses.

In fact the Landmark figures show that only people buying in the last year and a half may have property worth less than they paid. And they won't actually lose unless they sell for less than they paid. If they don't sell they lose nothing.

But back to the question of the market maturing, and the Metro station effect does add another hint that it probably is.

The National report is here.


Siwash said...

I think that we all have to call "a spade a spade." Everyone has lost on property. How so? Well, the majority of the buyers came on board in the last 1.5 years and caused the prices to increase significantly (in addition to the developers who kept on increasing their launch prices based upon the uptake). For those who bought earlier, they used their profits from their one unit (pre-2007) to purchase two units, then three, then a whole floor for instance. Thus, they have now commitments that they cannot sustain. Thus, 95% of buyers are losers (including myself).

Anonymous said...

on the topic of Metro... I have posted yesterday on my blog about my observation on some figures regarding the red-line... and to be honest...

this metro does not sound like it can replace our cars... check my blog here if you have the time

name/url said...

Well Siwash if you are calling a 'spade a spade' then your spade is hugely exaggerated. Yes those that bought recently (2 year and before) have a paper loss (only realised upon selling) but it is silly to magically assume that those that bought earlier used their gains to purchase more units. Where did you get this from? Hearsay, no more no less.

Seabee said...

name/url, I agree.

Siwash, I have to disagree with you because I'm afraid you're using huge sweeping generalisations based on rumour and speculation, like these: "Everyone has lost on property/The majority of the buyers came on board in the last 1.5 years/They used their profits from their one unit (pre-2007) to purchase two units, then three, then a whole floor for instance/95% of buyers are losers"

"majority" "everyone" "95%" are vastly exaggerated claims. And your claim that all those who bought before 2007 used profits to buy even more property simply isn't true.

J said...

"it depends when they bought, what they paid "

Isn't that the same with any market regardless of geographic or commodity? It seems like a pointless statement, Dubai's property market has crashed harder than most other places in the world- fact.

Seabee said...

J, yes of course it applies to all investments anywhere. But I disagree it's a pointless statement because of the extreme, sweeping statements which are made about buyers in Dubai's property market (Typified by Siwash's comment above).

Yes Dubai prices have crashed dramatically, but they're only back at 2007 levels - much the same has happened in other countries. Just check what's happened in places like the US, UK, Hong Kong, Ireland, Spain, Bulgaria...have a look at

The Globe Traveller said...

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Anonymous said...

" if you have not sold what you bought in last 18 months, then you have lost nothing". How come?

1. If you bought with money that is not yours, with money loaned from someone else at a high interest, with the intent of selling in 6 months and paying back and taking your profit, then you are in deep shit. You may not have enough money to pay your installments, and you are paying high interest that will kill you if you do not sell fast, and at a high profit. And you may not keep your nose above water with no money to pay installments, and thus sink. Lost nothing? Fancy that! Tell him it is only book loss, and hold on till the cows come home.

2. Many who have bought properties have lost their jobs. Now, for seabee and the hair splitters, this is a general statement. It is also a fact. Tell those people, who probably cant technically leave Dubai till they sell and settle their bank loans to hold on. They have no jobs,no income, no money to pay real estate installments, and cant exit. Just hold on, its only on papers!

Many people have bought more flats with money they made from previous sales. You have no data to the contrary, and since that is the case, you might as well accept that as a point of view.

I have finally realised what it is that pisses me off about this blog. It is all about hair splitting of minor things within the larger issue. the macro, the woods are always lost to seabee. it is always the trees, the hairsplitting that matters, not the sheer fact that lots of people are indeed in severe trouble over real estate fall of Dubai, much more than most other countries I know. In the end, the problem with the world is there are too many people who can sit and split hairs which might sound like rocket science but has no real insight.there are not enough who can see the larger issues and make sense of them, in a realistic way. Over to your hairsplitting.

Anonymous said...

"Yes Dubai prices have crashed dramatically, but they're only back at 2007 levels - much the same has happened in other countries. Just check what's happened in places like the US, UK, Hong Kong, Ireland, Spain, Bulgaria...have a look at"

While we are busy splitting hairs, are we not forgetting something of a larger scale here too? Almost all the countries you have mentioned have a population that can occupy the real state that has been built. Here you have some 10% actual residents, with real estate built for another 90% with no REAL rights or citizenship.
Also are we not sounding particularly stupid mentioning places like US UK in the same breath as Dubai for real estate? Those other places you mentioned have a history of economic cycles that have come and gone many times, and people have some historic trends and reality check. How can you even mention the one trick wonder Dubai real estate with no historic evidence, and no evaluation of its worth, in the same breath? World's largest real estate debacle? Is that something the PR could harp on? :-)

Seabee said...

"I have finally realised what it is that pisses me off about this blog."

If you want to avoid being pissed off, feel free to stop visiting.

BTW, as you seem to have plenty of opinions to express, why waste your time doing it here? You should have your own blog where you can tell the world what you think.

Be prepared to still be pissed off though, by people ridiculing your opinions and criticising what you say and how you say it.

Siwash said...

It is humorous that my initial comment generated so much hostility between people. Come on guys, can't we all just get along?!?!?! Well, each is entitled to their own opinion which I respect, but please note that my comment was not meant to be scientific although it was taken as such. It made me smile as the real estate debacle is really causing all of us to lose our cool easily. :-)

Seabee said...

Siwash, Like many other bloggers I have the comments facility open to anyone, to encourage dialogue, discussion and different points of view.

The net being what it is there are bound to be those who can't express disagreement or a different opinion without descending to abuse and hostility, directed not only at the blog owner but also at other commenters. I assume they're the same in the real world if they hear something they disagree with.

Fortunately, most people are civilised and well mannered even if they disagree with what's written.

The only way to stop hostile and abusive comments is to not allow comments at all, but I really want a dialogue and to hear other opinions so I keep it enabled.

I delete racism, libel and obscenity. The rest, however critical or abusive, are left for everyone to see.

Siwash said...

Fair enough although I did think you took Anon's critique personally. Anyway, I consider this subject closed.

Seabee said...

Siwash I didn't take it personally because I didn't bother to answer Anon's criticisms.

I'm happy to debate with people who want an adult 'conversation' but it's pointless trying to have a sensible exchange of views with people who start off being hostile.

My comment to Anon was because I find it very strange that people say how much they dislike a blog (not just this one) but are obviously regular readers!

Thanks for your contributions to 'Life in Dubai'

Legrand said...

Siwash, I bought pre-2007 and have lived in the property since then. For the past four years I have paid nothing in rent thereby saving hundreds of thousands of dirhams.

I used the savings to buy a modest second property and this has provided me with a healthy rental income for 3 years, enough to pay off the mortgage.

Even after the downturn my house is still worth considerably more than I paid for it and if the price fell below the original I could still come out ahead due to the avoidance of rent.

This is not an unusual story yet it is far removed from what you have described. I have no doubt that some people are over-extended but not everyone has lost on property, at least not yet.