At the end of last month I was talking here about the new so-called 'residence visa' for property owners, which the media and real estate spokespeople were lauding as a great move forward.
It was nothing of the sort of course, and not even a residence visa. It was a three year multi-entry visit visa for which, in spite of all the applause, we were given no details.
We were told that holders would have to leave the country every six months...which was 'clarified' a few days later by a statement that holders would not have to leave every six months.
The only other information was that holders would need proof of a bank account either here or overseas and a salary of Dh10,000 a month, and the visa would only apply to property 'worth Dh1 million'. They would also have to have medical insurance renewable every six months (strange) and take a medical here every two years.
But the real detail that property owners, and potential buyers, need wasn't, and still hasn't, been given. The announcement was made, then nothing.
Value of property for example. Based on what? The original price paid? Even with the burst bubble, apartments in my building that were originally bought for Dh450,000 are currently over Dh1 million - and they've been much higher than that of course. But if the original purchase price is the yardstick, none of the owners qualify for the visa.
Or is it based on current value? Two problems with that. One, who decides what current value is? Two, value fluctuates all the time depending on many factors. Something that's worth a million today may be worth less than a million in a month's time if interests rates go up, mortgages become even more difficult to find, a large supply of similar apartments is released.
Then as it isn't a residence visa, can holders apply for all the things that require a res. visa, such as a driving licence, DEWA connections and so on? Or are they treated the same as other visit visa holders?
And what's the cost? The original plan for a six month visa required the holder to exit the country and apply for a new visa to come back in...at Dh2,000 a time. That soon adds up if it's a family on the visa. We had no indication of the cost of the latest version.
Far from helping the real estate sector, this kind of part announcement leaving vital questions unanswered damages it even more.
Showing posts with label real estate. Show all posts
Showing posts with label real estate. Show all posts
Monday, July 25, 2011
Tuesday, July 05, 2011
Oh good, clarification.
Gulf News is pressing on with reports about what they present as the great new residence visa for foreign property owners.
As I pointed out last Wednesday, it ain't a residence visa, it's a multi-entry visit visa available to some property owners. With lots of conditions - many of them not announced yet.
Today GN has a story headed 'New residence visa will increase flexibility for real estate investors'.
Oh yeah?
The story includes some of the usual 'clarification' that we're so used to.
Last Wednesday Gulf News quoted Maj. Gen. Nasser Bin Al Awadi Al Menhali, Assistant Undersecretary for Naturalisation, Residence & Port Affairs, as saying: "Investors who own property worth Dh1 million can get three year mutiple-entry visit visas. However, they have to exit the country every six months".
Today they quote 'senior government officials' as saying: "The visa...will allow property investors to sponsor their families and stay in the UAE for three years without leaving."
So they either have to exit the country every six months or they don't. Wait for more 'clarification'.
As for the unannounced conditions, Major General Nasser Bin Al Awadi Al Menhali has told Gulf News that the full details of the law would be made public soon.
The report goes on to point out that: "It is still unclear if the visa provides investors all the usual benefits of a residence visa, such as enabling them to open bank accounts and apply for local driving licences."
Another thing that's unclear is the Dh1 million 'value' of the property. Is that the price paid or the value now? And if it's the value now, who fixes the value?
Deja vu. It's exactly as happened with the original six month visit visa, exitedly welcomed but misrepresented by the media and the real estate industry as a residence visa that would restore confidence and increase sales. They're again wildly enthusiastic, presenting the latest incarnation as the answer to many of the problems of the real estate sector and investors.
Take a deep breath fellas. We have conflicting information, the law isn't issued yet, the details haven't been announced, we don't know how it's going to work.
The Gulf News report here.
As I pointed out last Wednesday, it ain't a residence visa, it's a multi-entry visit visa available to some property owners. With lots of conditions - many of them not announced yet.
Today GN has a story headed 'New residence visa will increase flexibility for real estate investors'.
Oh yeah?
The story includes some of the usual 'clarification' that we're so used to.
Last Wednesday Gulf News quoted Maj. Gen. Nasser Bin Al Awadi Al Menhali, Assistant Undersecretary for Naturalisation, Residence & Port Affairs, as saying: "Investors who own property worth Dh1 million can get three year mutiple-entry visit visas. However, they have to exit the country every six months".
Today they quote 'senior government officials' as saying: "The visa...will allow property investors to sponsor their families and stay in the UAE for three years without leaving."
So they either have to exit the country every six months or they don't. Wait for more 'clarification'.
As for the unannounced conditions, Major General Nasser Bin Al Awadi Al Menhali has told Gulf News that the full details of the law would be made public soon.
The report goes on to point out that: "It is still unclear if the visa provides investors all the usual benefits of a residence visa, such as enabling them to open bank accounts and apply for local driving licences."
Another thing that's unclear is the Dh1 million 'value' of the property. Is that the price paid or the value now? And if it's the value now, who fixes the value?
Deja vu. It's exactly as happened with the original six month visit visa, exitedly welcomed but misrepresented by the media and the real estate industry as a residence visa that would restore confidence and increase sales. They're again wildly enthusiastic, presenting the latest incarnation as the answer to many of the problems of the real estate sector and investors.
Take a deep breath fellas. We have conflicting information, the law isn't issued yet, the details haven't been announced, we don't know how it's going to work.
The Gulf News report here.
Wednesday, June 29, 2011
Property visa changes - again
When foreigners were told they could buy property in designated areas of Dubai, a residence visa - subject to the usual DNRD requirements - was included as an added inducement to invest in the emirate.
But the goalposts were moved after the game was well under way.
The standard three year residence visa suddenly was no longer available. It was replaced by a six month visit visa - hardly fair to those who'd invested their money on the original basis. It was also a bad decision in relation to both confidence in Dubai being a good place to do business and in supporting the by-then crashed real estate sector.
Now that bad decision has been reversed, partially at least.
A three year visa is again offered, but it's still only a visit visa not a residence visa.
Gulf News quotes Maj. Gen. Nasser Bin Al Awadi Al Menhali, Assistant Undersecretary for Naturalisation, Residence & Port Affairs, as saying: "Investors who own property worth Dh1 million can get three year mutiple-entry visit visas. However, they have to exit the country every six months".
The Khaleej Times report adds that a property owner applying for the visa: "...also needs to open a bank account locally or aboard and is required to provide proof of a minimum monthly income of Dh10,000. The investor shall also get a medical insurance renewable every six months, apart from a valid medical fitness test every two years."
It's a step in the right direction but it still misses the target. It needs to be a true residence visa. And it needs to be simple.
But the goalposts were moved after the game was well under way.
The standard three year residence visa suddenly was no longer available. It was replaced by a six month visit visa - hardly fair to those who'd invested their money on the original basis. It was also a bad decision in relation to both confidence in Dubai being a good place to do business and in supporting the by-then crashed real estate sector.
Now that bad decision has been reversed, partially at least.
A three year visa is again offered, but it's still only a visit visa not a residence visa.
Gulf News quotes Maj. Gen. Nasser Bin Al Awadi Al Menhali, Assistant Undersecretary for Naturalisation, Residence & Port Affairs, as saying: "Investors who own property worth Dh1 million can get three year mutiple-entry visit visas. However, they have to exit the country every six months".
The Khaleej Times report adds that a property owner applying for the visa: "...also needs to open a bank account locally or aboard and is required to provide proof of a minimum monthly income of Dh10,000. The investor shall also get a medical insurance renewable every six months, apart from a valid medical fitness test every two years."
It's a step in the right direction but it still misses the target. It needs to be a true residence visa. And it needs to be simple.
Monday, November 22, 2010
Clarification needed
It's all too frequent that the papers report an extremely important subject with an utterly confusing article.
There's another one from what is no longer Emirates Business 24/7 but emirates247.com
It's about freehold property ownership in Dubai, a subject important to a lot of people.
Going back to the property boom beginnings, Sheikh Mohammed decreed that non-GCC foreigners could buy freehold property in special designated areas.
I think I'm right in saying that of the emirates offering property ownership to foreigners only Dubai declared it to be freehold. The others offered leasehold of 99 years.
In the Court of Cassation there was a case involving a property dispute between two expat owners of a villa.
According to emirates247, during the case the court ruled that ...in some areas such as freehold property, expatriates have the right of ownership limited with time...have the right to use property (rent or live in it) or alternatively possess right to rent for a period not exceeding 99 years.
Then an even more mystifying: The Ruler's decree is a command and ownership cases require immediate retroactive action, ruled the court.
What?
So freehold property was offered, many people bought on that basis, now the Court of Cassation seems to have declared that it's actually leasehold.
It's not the clearest article you'll ever read but I'm sure that's what it's saying.
I'm sure everyone who bought on the basis of their property being freehold would like some clarification.
The article is here.
There's another one from what is no longer Emirates Business 24/7 but emirates247.com
It's about freehold property ownership in Dubai, a subject important to a lot of people.
Going back to the property boom beginnings, Sheikh Mohammed decreed that non-GCC foreigners could buy freehold property in special designated areas.
I think I'm right in saying that of the emirates offering property ownership to foreigners only Dubai declared it to be freehold. The others offered leasehold of 99 years.
In the Court of Cassation there was a case involving a property dispute between two expat owners of a villa.
According to emirates247, during the case the court ruled that ...in some areas such as freehold property, expatriates have the right of ownership limited with time...have the right to use property (rent or live in it) or alternatively possess right to rent for a period not exceeding 99 years.
Then an even more mystifying: The Ruler's decree is a command and ownership cases require immediate retroactive action, ruled the court.
What?
So freehold property was offered, many people bought on that basis, now the Court of Cassation seems to have declared that it's actually leasehold.
It's not the clearest article you'll ever read but I'm sure that's what it's saying.
I'm sure everyone who bought on the basis of their property being freehold would like some clarification.
The article is here.
Tuesday, January 05, 2010
Burj Dubai Khalifa official opening
After the big firework/light display for the official opening we at last know the height of the world's tallest structure.
Photo: The National
It's 828 metres, a dramatic increase on the previous tallest building Taipei 101 which is 509.2 metres.
You get some idea of the size of the thing when you see it against other 'normal' skyscrapers...
Photo: Bloomberg. Sydney Morning Herald
It isn't just the height that strikes me but also the mass. Each of those sections at the bottom are the size of a 'normal' tower. It's an absolutely huge building.
Brand Dubai's suffered a loss though because the word Dubai has disappeared from the name. It's officially Burj Khalifa, named after the President of the UAE and Ruler of Abu Dhabi, Sheikh Khalifa Bin Zayed Al Nahyan.
Burj, by the way, is the Arabic word for tower.
The opening has been covered all over the world, naturally, and I've been glancing at comments left on blogs and forums.
Two particular areas, the renaming and the finance, are attracting the usual crowd of the uninformed.
On the renaming there are plenty of comments that it's payback for the Abu Dhabi loans to some Dubai World companies and that Abu Dhabi will now own the building.
The other area is that 'Dubai's bust' and can't afford the building.
There are several things these people don't understand. First, they don't understand that 'Dubai' doesn't own the building, and nor can 'Abu Dhabi'. They don't understand that the developer is Emaar, which is a very profitable company and nothing to do with Dubai World. They don't understand that the building was over 90% sold off-plan, that the individual investors own the building and that their money was used to fund the construction.
It's a fact of life that a complete lack of knowledge doesn't deter people from stridently stating an opinion, confidently expressed as fact but in reality far from it.
The renaming is actually more far reaching, especially for Brand Dubai, than just changing the nameplate on one building.
The city being built around the tower is Downtown Burj Dubai. Presumably that will now be Downtown Burj Khalifa. The Metro station is Burj Dubai Station, which presumably now has to be Burj Khalifa Station. The brand name Dubai has lost a lot of future publicity.
There are other areas which are affected too, such as contracts held by the thousand or so owners, which must say they own part of Burj Dubai and will therefore need to be changed to say Burj Khalifa.
Interesting times.
Reuters have a clip of the fireworks on YouTube, here.
Photo: The National
It's 828 metres, a dramatic increase on the previous tallest building Taipei 101 which is 509.2 metres.
You get some idea of the size of the thing when you see it against other 'normal' skyscrapers...
Photo: Bloomberg. Sydney Morning Herald
It isn't just the height that strikes me but also the mass. Each of those sections at the bottom are the size of a 'normal' tower. It's an absolutely huge building.
Brand Dubai's suffered a loss though because the word Dubai has disappeared from the name. It's officially Burj Khalifa, named after the President of the UAE and Ruler of Abu Dhabi, Sheikh Khalifa Bin Zayed Al Nahyan.
Burj, by the way, is the Arabic word for tower.
The opening has been covered all over the world, naturally, and I've been glancing at comments left on blogs and forums.
Two particular areas, the renaming and the finance, are attracting the usual crowd of the uninformed.
On the renaming there are plenty of comments that it's payback for the Abu Dhabi loans to some Dubai World companies and that Abu Dhabi will now own the building.
The other area is that 'Dubai's bust' and can't afford the building.
There are several things these people don't understand. First, they don't understand that 'Dubai' doesn't own the building, and nor can 'Abu Dhabi'. They don't understand that the developer is Emaar, which is a very profitable company and nothing to do with Dubai World. They don't understand that the building was over 90% sold off-plan, that the individual investors own the building and that their money was used to fund the construction.
It's a fact of life that a complete lack of knowledge doesn't deter people from stridently stating an opinion, confidently expressed as fact but in reality far from it.
The renaming is actually more far reaching, especially for Brand Dubai, than just changing the nameplate on one building.
The city being built around the tower is Downtown Burj Dubai. Presumably that will now be Downtown Burj Khalifa. The Metro station is Burj Dubai Station, which presumably now has to be Burj Khalifa Station. The brand name Dubai has lost a lot of future publicity.
There are other areas which are affected too, such as contracts held by the thousand or so owners, which must say they own part of Burj Dubai and will therefore need to be changed to say Burj Khalifa.
Interesting times.
Reuters have a clip of the fireworks on YouTube, here.
Wednesday, December 30, 2009
Bounced cheques committee
Only a few weeks ago a decree was issued setting up a judicial committee to settle disputes over bounced cheques relating to property in Dubai.
With speed that surprises me the bounced cheques committee will apparently be ready to start hearing cases in the next two weeks.
It's a huge and welcome move away from the existing 'go to jail' system.
The committee has a lot of power too.
The decree says that Public Prosecution and courts can't carry out any investigation or issue any ruling relating to bounced property cheques until the case is looked into by the committee.
It also says that judgments pronounced by the committee will be decisive and cannot be challenged. They'll be implemented through the execution department of the Dubai Courts.
They're going to be busy - they say that over 500 cases have already been transferred to them by Jebel Ali police station.
EmBiz 247 has the story here.
With speed that surprises me the bounced cheques committee will apparently be ready to start hearing cases in the next two weeks.
It's a huge and welcome move away from the existing 'go to jail' system.
The committee has a lot of power too.
The decree says that Public Prosecution and courts can't carry out any investigation or issue any ruling relating to bounced property cheques until the case is looked into by the committee.
It also says that judgments pronounced by the committee will be decisive and cannot be challenged. They'll be implemented through the execution department of the Dubai Courts.
They're going to be busy - they say that over 500 cases have already been transferred to them by Jebel Ali police station.
EmBiz 247 has the story here.
Tuesday, December 08, 2009
A different view
Back in February I posted about the changing view from apartments in Dubai Marina. Far from the views buyers expected when they bought off-plan.
The original plans for the Marina, and the city in general, are changed so often that this isn't unusual.
There've been many changes to the original master plan for Dubai Marina and as a result people paying a premium for views often ended up with something very different or even no view.
A big change for some buyers was the introduction of the Metro. For example, the station at JLT was built with its pedestrian bridge across Sheikh Zayed Road to Dubai Marina. Very convenient it will be too, when the station is opened.
I'm not sure the buyers of these apartments will be happy with the convenience though. On the plan they would have seen there was nothing between them and Jumeirah Lake Towers. A nice open space with not a bad view.
Not now:
The original plans for the Marina, and the city in general, are changed so often that this isn't unusual.
There've been many changes to the original master plan for Dubai Marina and as a result people paying a premium for views often ended up with something very different or even no view.
A big change for some buyers was the introduction of the Metro. For example, the station at JLT was built with its pedestrian bridge across Sheikh Zayed Road to Dubai Marina. Very convenient it will be too, when the station is opened.
I'm not sure the buyers of these apartments will be happy with the convenience though. On the plan they would have seen there was nothing between them and Jumeirah Lake Towers. A nice open space with not a bad view.
Not now:
Monday, November 16, 2009
Changing times
Not so long ago, seeing one of these around Dubai Marina was unthinkable. Now there are more than a few:
Not good for investors but good for tenants and for business in general. The ridiculous and unsustainable rents were killing the goose that laid the golden egg.
Not good for investors but good for tenants and for business in general. The ridiculous and unsustainable rents were killing the goose that laid the golden egg.
Wednesday, August 12, 2009
Aussie vs Aussie over Dubai Waterfront deal
Dubai real estate is getting coverage in the Australian media again. This time it's the story that a claim has been lodged in the Federal Court in Brisbane over an alleged con relating to land on The Waterfront project.
It's Aussies versus Aussies in this one.
Sunland, a company backed by the Packer family, one of Australia's richest and most powerful families, says that two Australians 'conspired to defraud the company'.
There's old school tie stuff involved too, the two defendants, Matt Joyce and Angus Reed,having been at one of Melbourne's best schools together.
Matt Joyce, who was managing director of Nakheel's Dubai Waterfront project, has been in jail since the beginning of the year and was recently charged after a corruption investigation. Mr Reed is in Melbourne, a fugative according to Dubai authorities.
The claim is that the pair hid their friendship from Sunland and misled them into believing that Reed's company owned a particular block of land on The Waterfront project. Sunland payed Reed's company over A$14 million for 'releasing' the land but were later told by the Emirates audit office that Mr Reed had never purchased the property in question, and there had been no reason why Sunland could not have purchased the property in their own right.
It's a complicated plot and if you're interested you can read about it in Sydney Morning Herald and The Australian.
It's Aussies versus Aussies in this one.
Sunland, a company backed by the Packer family, one of Australia's richest and most powerful families, says that two Australians 'conspired to defraud the company'.
There's old school tie stuff involved too, the two defendants, Matt Joyce and Angus Reed,having been at one of Melbourne's best schools together.
Matt Joyce, who was managing director of Nakheel's Dubai Waterfront project, has been in jail since the beginning of the year and was recently charged after a corruption investigation. Mr Reed is in Melbourne, a fugative according to Dubai authorities.
The claim is that the pair hid their friendship from Sunland and misled them into believing that Reed's company owned a particular block of land on The Waterfront project. Sunland payed Reed's company over A$14 million for 'releasing' the land but were later told by the Emirates audit office that Mr Reed had never purchased the property in question, and there had been no reason why Sunland could not have purchased the property in their own right.
It's a complicated plot and if you're interested you can read about it in Sydney Morning Herald and The Australian.
Thursday, July 23, 2009
Oh good, another clarification!
An old one has popped up out of nowhere again.
One that we kept getting wrong, misunderstanding the very clear and concise statements and actions of officials.
Then we misunderstood the subsequent clear and concise clarifications from other officials.
So now we have another clear and concise clarification, clarifying all the previous clarifications.
We can be in doubt no longer. Everyone knows, as officials keep telling us.
Sorry, I should explain I'm talking about Dubai Municipality's 'one villa one family' rule.
Just to remind you so that you're clear about it all:
The campaign was launched in April 2008. It was officially called 'one villa one family'.
By July there were reports that: "Families living in shared villa accommodations in the Jumeirah-1 and Abu Hail areas have been asked to vacate under Dubai Municipality's ongoing 'One Villa-One Family' campaign.
Since the launch of the campaign in April, almost 2,400 eviction notices have been served to families living in villas in the Rashidiya area, and water and electricity supply to 280 villas have been disconnected."
In September I reproduced this DM advertisement which clearly states that within thirty days from that announcement it was obligatory to vacate multi-families.
On October 3, 2008: "The Municipality’s 'One Villa, One Family' campaign kicked off this week with inspectors combing through villas in Al Rashidiya area, an official said."We study every case individually. However, the rule we enforce is one family per villa."
In November we read that: "Dubai Municipality is cutting power and water to as many as 200 villas a week in an attempt to evict people who are sharing homes, but some of the tenants are defying authorities and illegally reconnecting services, a senior official said yesterday."
Naturally we stupidly misunderstood it all. We misinterpreted all that as meaning that there was a 'one villa one family' law and that it was being enforced.
It obviously needed clarification so that we really understood the situation, which we received on February 1st, 2009:
"There is no "one villa, one family" rule in Dubai and the campaign against overcrowded villas has been misunderstood, a top civil official said on Sunday.
Hussain Nasser Lootah, Director General of Dubai Municipality said the municipality did not have any problem with more than one family living in a villa, provided it was big enough."The municipality has started a campaign against overcrowding in villas to ensure the safety and security of residents."
I was relieved that it was clarified for us at long last. There was no 'one villa one family' rule, it was simply a safety issue.
But then with so many previous examples of how we keep misunderstanding even the simplest statement from helpful officials, that obviously needed clarification. Just to make sure we all understood.
So that 'everybody knows'.
We have it today in The National:
"Dubai Municipality will intensify its one villa, one family campaign next month, and warned yesterday that families and landlords could face stiff fines for breaking the law. Hussain Nasser Lootah, the municipality’s director general, said penalties could hit Dh50,000 (US$13,000) for violators.
'We made this announcement two years ago, and it was made very clear that sharing villas would not be allowed,' Mr Lootah said. 'Now we have given enough time, and there will be no more exceptions.'"
I'm going to lie down now...
If you think I'm making it up I have an earlier posting on the subject, with links to the clarifications and all that. It's here.
And today's clarification in The National is here.
One that we kept getting wrong, misunderstanding the very clear and concise statements and actions of officials.
Then we misunderstood the subsequent clear and concise clarifications from other officials.
So now we have another clear and concise clarification, clarifying all the previous clarifications.
We can be in doubt no longer. Everyone knows, as officials keep telling us.
Sorry, I should explain I'm talking about Dubai Municipality's 'one villa one family' rule.
Just to remind you so that you're clear about it all:
The campaign was launched in April 2008. It was officially called 'one villa one family'.
By July there were reports that: "Families living in shared villa accommodations in the Jumeirah-1 and Abu Hail areas have been asked to vacate under Dubai Municipality's ongoing 'One Villa-One Family' campaign.
Since the launch of the campaign in April, almost 2,400 eviction notices have been served to families living in villas in the Rashidiya area, and water and electricity supply to 280 villas have been disconnected."
In September I reproduced this DM advertisement which clearly states that within thirty days from that announcement it was obligatory to vacate multi-families.
On October 3, 2008: "The Municipality’s 'One Villa, One Family' campaign kicked off this week with inspectors combing through villas in Al Rashidiya area, an official said."We study every case individually. However, the rule we enforce is one family per villa."
In November we read that: "Dubai Municipality is cutting power and water to as many as 200 villas a week in an attempt to evict people who are sharing homes, but some of the tenants are defying authorities and illegally reconnecting services, a senior official said yesterday."
Naturally we stupidly misunderstood it all. We misinterpreted all that as meaning that there was a 'one villa one family' law and that it was being enforced.
It obviously needed clarification so that we really understood the situation, which we received on February 1st, 2009:
"There is no "one villa, one family" rule in Dubai and the campaign against overcrowded villas has been misunderstood, a top civil official said on Sunday.
Hussain Nasser Lootah, Director General of Dubai Municipality said the municipality did not have any problem with more than one family living in a villa, provided it was big enough."The municipality has started a campaign against overcrowding in villas to ensure the safety and security of residents."
I was relieved that it was clarified for us at long last. There was no 'one villa one family' rule, it was simply a safety issue.
But then with so many previous examples of how we keep misunderstanding even the simplest statement from helpful officials, that obviously needed clarification. Just to make sure we all understood.
So that 'everybody knows'.
We have it today in The National:
"Dubai Municipality will intensify its one villa, one family campaign next month, and warned yesterday that families and landlords could face stiff fines for breaking the law. Hussain Nasser Lootah, the municipality’s director general, said penalties could hit Dh50,000 (US$13,000) for violators.
'We made this announcement two years ago, and it was made very clear that sharing villas would not be allowed,' Mr Lootah said. 'Now we have given enough time, and there will be no more exceptions.'"
I'm going to lie down now...
If you think I'm making it up I have an earlier posting on the subject, with links to the clarifications and all that. It's here.
And today's clarification in The National is here.
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.
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.
Saturday, June 27, 2009
Property sanity?
There's a hint in a report in 'Gulf News' that Dubai's property market may be edging towards some sanity.
Better Homes and Landmark, two major real estate agents, are talking about some price increases over the past two months.
Ignoring the price rise claims, because they're average prices in a one month period, the encouraging part is that they talk about property in specific locations rather than generalising about the whole of Dubai.
And at long last we're hearing terms which are normal in sensible property markets. Phrases such as: "Developments in certain locations, with high build quality and facilities are experiencing price increases." "Prices are increasing, dependent on the location of the property and the quality of the building." "Location, views, amenities and infrastructure determine prices."
Those things have largely been ignored in Dubai's property market in the past.
It's long overdue after the absolute chaos of the free-for-all since freehold property for foreigners was announced in early 2002.
Until very recently there were no laws in place, nothing governing real estate agents or brokers, no escrow accounts, no protection for buyers and often no contracts were issued until after the money had been paid.
Although an awful lot of people have lost money, especially since the world-wide economic crisis hit, I'm amazed the numbers are as low as they are.
Developers, completely unknown to investors, sold off-the-plan apartments and villas before any work whatsoever had begun. Many buyers, more than a few never having visited Dubai, bought on faith alone, and perhaps greed, from plans and an artist's impression of the finished building and neighbourhood. It wasn't unusual for the plans, specs and renderings to be somewhat economical with the truth.
Many developers had no capital but relied on payments from investors to fund the projects. It would have been easy for the developers to pocket the money and run, but surprisingly few did.
Prices bore little relationship to reality. Master developers initially sold at way below what the market was prepared to pay. That encouraged speculators to leap in and on-sell almost immediately at a huge profit. It wasn't unusual for speculators to have no finance, they simply on-sold before the payment was due.
Stories appeared about the huge profits to be made and the market took on a life of its own with speculators and investors pouring in and pushing prices to ludicrous and unsustainable levels.
The end result, a finished building, didn't matter, didn't come into the picture. What was being bought and sold wasn't a building but simply a way to make a quick buck, and that worked for a while.
But each trade was nearer to the end product and that's where the rules of buying real estate began to loom.
In the feeding frenzy the rules governing real estate buying were ignored. Location, quality, price weren't considered. People who bought at the peak and the year or two leading up to it now have negative equity. Many will lose their property and their money, just as they do all over the world.
Many more are going to lose their money because since the economic crisis hit developers are being found out. If they didn't have finance for the project, or if they diverted income to other projects, the project is in trouble and may never be finished - or started in some cases.
When the dust settles there'll be the early speculators gleefully counting their huge profits but plenty of others counting their losses.
In future there'll be fewer developers, fewer developments, more care taken in design and build quality, more realistic prices. We should also see the rules of property buying being applied and maybe, just maybe, this report indicates that's started to happen.
You can read the report here.
Better Homes and Landmark, two major real estate agents, are talking about some price increases over the past two months.
Ignoring the price rise claims, because they're average prices in a one month period, the encouraging part is that they talk about property in specific locations rather than generalising about the whole of Dubai.
And at long last we're hearing terms which are normal in sensible property markets. Phrases such as: "Developments in certain locations, with high build quality and facilities are experiencing price increases." "Prices are increasing, dependent on the location of the property and the quality of the building." "Location, views, amenities and infrastructure determine prices."
Those things have largely been ignored in Dubai's property market in the past.
It's long overdue after the absolute chaos of the free-for-all since freehold property for foreigners was announced in early 2002.
Until very recently there were no laws in place, nothing governing real estate agents or brokers, no escrow accounts, no protection for buyers and often no contracts were issued until after the money had been paid.
Although an awful lot of people have lost money, especially since the world-wide economic crisis hit, I'm amazed the numbers are as low as they are.
Developers, completely unknown to investors, sold off-the-plan apartments and villas before any work whatsoever had begun. Many buyers, more than a few never having visited Dubai, bought on faith alone, and perhaps greed, from plans and an artist's impression of the finished building and neighbourhood. It wasn't unusual for the plans, specs and renderings to be somewhat economical with the truth.
Many developers had no capital but relied on payments from investors to fund the projects. It would have been easy for the developers to pocket the money and run, but surprisingly few did.
Prices bore little relationship to reality. Master developers initially sold at way below what the market was prepared to pay. That encouraged speculators to leap in and on-sell almost immediately at a huge profit. It wasn't unusual for speculators to have no finance, they simply on-sold before the payment was due.
Stories appeared about the huge profits to be made and the market took on a life of its own with speculators and investors pouring in and pushing prices to ludicrous and unsustainable levels.
The end result, a finished building, didn't matter, didn't come into the picture. What was being bought and sold wasn't a building but simply a way to make a quick buck, and that worked for a while.
But each trade was nearer to the end product and that's where the rules of buying real estate began to loom.
In the feeding frenzy the rules governing real estate buying were ignored. Location, quality, price weren't considered. People who bought at the peak and the year or two leading up to it now have negative equity. Many will lose their property and their money, just as they do all over the world.
Many more are going to lose their money because since the economic crisis hit developers are being found out. If they didn't have finance for the project, or if they diverted income to other projects, the project is in trouble and may never be finished - or started in some cases.
When the dust settles there'll be the early speculators gleefully counting their huge profits but plenty of others counting their losses.
In future there'll be fewer developers, fewer developments, more care taken in design and build quality, more realistic prices. We should also see the rules of property buying being applied and maybe, just maybe, this report indicates that's started to happen.
You can read the report here.
Monday, June 08, 2009
Ebony & ivory
Gulf News today ran a press release from Al Fajer Properties saying that all its projects are on schedule.
They say they voluntarily asked for a construction audit to be carried out by a RERA-approved independent party.
Sounds boring I know, but stay with me.
The press release includes the information:
The results confirm that work on Phase 1 has neared 80 per cent completion and 15 per cent of construction has been completed on Phase 2 (including the Ebony and Ivory Towers) with work continuing.
That reference to Phase 2 is the important bit.
A week ago the UK newspaper The Independent ran an article headlined "Dubai property scandal claim emerges amid media blackout"
It's full of sensational accusations.
It claims that customers were misled into paying millions of dollars by the use of fake photographs, which showed construction of three buildings, purported to be Ebony 1, Ivory 1 and Ivory 2, up to the sixth storey. It says that the photographs were in fact of buildings on neighbouring plots and the three towers are actually empty holes in the ground.
It goes on to say that angry investors were in the city, they had alerted local and regional media and a press conference had been arranged. But it says the press conference was cancelled on a pretext, that there was a media blackout ordered by the authorities, that government officials ordered news agencies to 'pull' stories which were appearing on websites.
To add even more spice they include 'links to the ruling family of the UAE city-state' a couple of times in the article. The President of Al Fajer Properties is Sheikh Maktoum Bin Hasher Al Maktoum.
Now the PR battle is on.
Without, of course, any reference to the accusations, the company says the independent and approved auditors confirm that 15 per cent of this project's construction has been completed and work is continuing.
They say that The audit affirms that Al Fajer Properties have attained the highest level of transparency and is in full compliance with all Rera rules and regulations.
They also say that progress on the project will be available on the Rera website shortly.
I think this is a pretty good example of how a company should react in the face of such accusations.
Compare it with the usual principle used here of ignore it and it'll go away. Atlantis and the whale shark are a classic of the usual method.
Accusations have been made which the company faces head on. They enlist offical help in the shape of RERA, use independent and approved auditors, link in with the official RERA website.
Then they issue a well constructed press release covering all the points and including lots of positive comments. They also use it to not only align themselves with RERA but to remind us of the professional standing of RERA.
The ball is now firmly back in the court of the investors and The Independent.
It'll be an interesting story to follow.
What this PR doesn't do is answer the accusations of government interference, of media blackouts, of pulled stories. Nor should they, it's not a company's responsibility to answer those accusations, but I'd like that side of it to see the light of day.
If you'd like to start at the beginning, The Independent has the story by 'Heerkani Chohan', "the pseudonym of a journalist living and working in Dubai". That story is here.
Al Fajer's answer to the accusations is here in Gulf News.
They say they voluntarily asked for a construction audit to be carried out by a RERA-approved independent party.
Sounds boring I know, but stay with me.
The press release includes the information:
The results confirm that work on Phase 1 has neared 80 per cent completion and 15 per cent of construction has been completed on Phase 2 (including the Ebony and Ivory Towers) with work continuing.
That reference to Phase 2 is the important bit.
A week ago the UK newspaper The Independent ran an article headlined "Dubai property scandal claim emerges amid media blackout"
It's full of sensational accusations.
It claims that customers were misled into paying millions of dollars by the use of fake photographs, which showed construction of three buildings, purported to be Ebony 1, Ivory 1 and Ivory 2, up to the sixth storey. It says that the photographs were in fact of buildings on neighbouring plots and the three towers are actually empty holes in the ground.
It goes on to say that angry investors were in the city, they had alerted local and regional media and a press conference had been arranged. But it says the press conference was cancelled on a pretext, that there was a media blackout ordered by the authorities, that government officials ordered news agencies to 'pull' stories which were appearing on websites.
To add even more spice they include 'links to the ruling family of the UAE city-state' a couple of times in the article. The President of Al Fajer Properties is Sheikh Maktoum Bin Hasher Al Maktoum.
Now the PR battle is on.
Without, of course, any reference to the accusations, the company says the independent and approved auditors confirm that 15 per cent of this project's construction has been completed and work is continuing.
They say that The audit affirms that Al Fajer Properties have attained the highest level of transparency and is in full compliance with all Rera rules and regulations.
They also say that progress on the project will be available on the Rera website shortly.
I think this is a pretty good example of how a company should react in the face of such accusations.
Compare it with the usual principle used here of ignore it and it'll go away. Atlantis and the whale shark are a classic of the usual method.
Accusations have been made which the company faces head on. They enlist offical help in the shape of RERA, use independent and approved auditors, link in with the official RERA website.
Then they issue a well constructed press release covering all the points and including lots of positive comments. They also use it to not only align themselves with RERA but to remind us of the professional standing of RERA.
The ball is now firmly back in the court of the investors and The Independent.
It'll be an interesting story to follow.
What this PR doesn't do is answer the accusations of government interference, of media blackouts, of pulled stories. Nor should they, it's not a company's responsibility to answer those accusations, but I'd like that side of it to see the light of day.
If you'd like to start at the beginning, The Independent has the story by 'Heerkani Chohan', "the pseudonym of a journalist living and working in Dubai". That story is here.
Al Fajer's answer to the accusations is here in Gulf News.
Wednesday, May 27, 2009
Property auction 'flop'
A follow on to my previous post about the slump in property prices because the first ever property auction in Dubai was held yesterday evening.
Arabian Business uses words like 'failure' and 'flop' in its stories, but that's too simplistic.
They also headline one story: "Property market fails its big test" which is pushing the boundaries a bit. Big test? It was just an auction of four properties. The big test is actually the ongoing, day-to-day market.
Media and the rumour mill will undoubtedly use this as another example of a still-collapsing market but I don't think it actually tells us anything other than the concept of the property auction isn't understood here.
The failure in my opinion is less the auction results than the fact that the market - agents, vendors and potential buyers alike - was not made aware of the concept and doesn't understand what the auction was all about.
That's the most important job for the company behind it, Madania Real Estate, to tackle before the next auction, which is planned for June.
Auctions are the usual way of selling a property in Sydney. I've bought and sold at auctions, I've been outbid at others, I've dropped out when the bids went too high, I've attended very many others just for market information. In Oz we're used to them, we understand them...but they're new to this market and most people come from countries where they're unusual so they have no understanding of them.
The Aussie format has simply been brought to this market as a complete package, but not enough work was done on explaining the concept to a market which has no knowledge of it.
The general view here is that auctions are where you get a bargain, that this is where the properties offered will be distressed sales by desperate owners.
That couldn't be further from the truth.
This is an alternative to a private treaty sale of a property, which is where the property is simply advertised at a price - on which the buyer always asks for a discount.
In an auction the vendor puts a reserve price on the property, if bidding reaches the reserve the property is sold to the highest bidder. If it fails to reach reserve, which is not unusual, the highest bidder and the vendor are brought together by the agent who tries to get them to compromise and agree a price. Not much different from a private treaty sale where the two parties haggle over the price.
In fact in Oz it's often seen as a way of getting a price better than market value, particularly if you're selling a desirable property and there are two or more interested buyers who will push the price up. I've seen that happen more than a few times.
The complete lack of understanding of this by the market here is shown in a couple of the Arabian Business reports.
Anil Bhoyrul says, for example:
The concept of property auctions is that a number of dirt cheap properties are up for grabs.
You turn up with a small amount of cash, and walk away with the deal of your life. The greater the personal financial misery of the seller, the better.
Which is where last night went wrong to begin with. According to Kuceli himself, the sellers who put their properties up for sale were merely looking for another sales channel, having tried newspaper and web advertising.
They were not actually that desperate. That’s why no sales were made.
Way, way off the mark, that isn't the concept at all.
Anil continues:
Tuesday’s auction was the first test of the public’s appetite to get back into the market. Would they come in their hundreds, cheque books and passports ready, eager to prey on the ashes of the property boom?
I disagree, it wasn't the first test of the public's appetite to get back into the market, we have ongoing daily information on that, it was simply a test of an unknown method of selling properties.
And then:
...of the 100 people who showed up, only 9 had registered beforehand to even be allowed to make a bid. Who were the other 91 people? Around 35 journalists and 56 estate agents.
Again this demonstrates a lack of understanding because it's perfectly normal. I've been to many auctions where there were scores of people but only one or two bidders (and some where there were none). The vast majority are neighbours and friends of the vendor, plus people there to gauge the market.
Another story includes this from a real estate broker:
“There are a lot of distressed properties for sale from people who are either leaving town or just want to increase their cashflow immediately. It’s those properties that should be auctioned.”
Again it shows a lack of understanding of the concept.
Another problem with this auction was the few properties for sale, only four. There were more planned but the Land Department has to approve each one apparently, and approvals weren't obtained on all in time for the auction.
Also, the auction was held in a hotel. In Sydney the usual method is for the auction to be held on site at the property for sale and I suspect this may be a better way here too.
This auction method may or may not be the way to go here, but we won't know that for sure unless in the first place everyone involved in the market understands the concept. That's the critical project for Madania Real Estate.
But the auction results don't tell us anything we don't already know about the property market.
By the way, in Sydney the clearance rates (properties sold at auction or by negotiation up to midnight on auction day between highest bidder and vendor) have been at 66% the last two weekends. A third failed to sell at the auction.
You'll find the stories here, here and here.
Arabian Business uses words like 'failure' and 'flop' in its stories, but that's too simplistic.
They also headline one story: "Property market fails its big test" which is pushing the boundaries a bit. Big test? It was just an auction of four properties. The big test is actually the ongoing, day-to-day market.
Media and the rumour mill will undoubtedly use this as another example of a still-collapsing market but I don't think it actually tells us anything other than the concept of the property auction isn't understood here.
The failure in my opinion is less the auction results than the fact that the market - agents, vendors and potential buyers alike - was not made aware of the concept and doesn't understand what the auction was all about.
That's the most important job for the company behind it, Madania Real Estate, to tackle before the next auction, which is planned for June.
Auctions are the usual way of selling a property in Sydney. I've bought and sold at auctions, I've been outbid at others, I've dropped out when the bids went too high, I've attended very many others just for market information. In Oz we're used to them, we understand them...but they're new to this market and most people come from countries where they're unusual so they have no understanding of them.
The Aussie format has simply been brought to this market as a complete package, but not enough work was done on explaining the concept to a market which has no knowledge of it.
The general view here is that auctions are where you get a bargain, that this is where the properties offered will be distressed sales by desperate owners.
That couldn't be further from the truth.
This is an alternative to a private treaty sale of a property, which is where the property is simply advertised at a price - on which the buyer always asks for a discount.
In an auction the vendor puts a reserve price on the property, if bidding reaches the reserve the property is sold to the highest bidder. If it fails to reach reserve, which is not unusual, the highest bidder and the vendor are brought together by the agent who tries to get them to compromise and agree a price. Not much different from a private treaty sale where the two parties haggle over the price.
In fact in Oz it's often seen as a way of getting a price better than market value, particularly if you're selling a desirable property and there are two or more interested buyers who will push the price up. I've seen that happen more than a few times.
The complete lack of understanding of this by the market here is shown in a couple of the Arabian Business reports.
Anil Bhoyrul says, for example:
The concept of property auctions is that a number of dirt cheap properties are up for grabs.
You turn up with a small amount of cash, and walk away with the deal of your life. The greater the personal financial misery of the seller, the better.
Which is where last night went wrong to begin with. According to Kuceli himself, the sellers who put their properties up for sale were merely looking for another sales channel, having tried newspaper and web advertising.
They were not actually that desperate. That’s why no sales were made.
Way, way off the mark, that isn't the concept at all.
Anil continues:
Tuesday’s auction was the first test of the public’s appetite to get back into the market. Would they come in their hundreds, cheque books and passports ready, eager to prey on the ashes of the property boom?
I disagree, it wasn't the first test of the public's appetite to get back into the market, we have ongoing daily information on that, it was simply a test of an unknown method of selling properties.
And then:
...of the 100 people who showed up, only 9 had registered beforehand to even be allowed to make a bid. Who were the other 91 people? Around 35 journalists and 56 estate agents.
Again this demonstrates a lack of understanding because it's perfectly normal. I've been to many auctions where there were scores of people but only one or two bidders (and some where there were none). The vast majority are neighbours and friends of the vendor, plus people there to gauge the market.
Another story includes this from a real estate broker:
“There are a lot of distressed properties for sale from people who are either leaving town or just want to increase their cashflow immediately. It’s those properties that should be auctioned.”
Again it shows a lack of understanding of the concept.
Another problem with this auction was the few properties for sale, only four. There were more planned but the Land Department has to approve each one apparently, and approvals weren't obtained on all in time for the auction.
Also, the auction was held in a hotel. In Sydney the usual method is for the auction to be held on site at the property for sale and I suspect this may be a better way here too.
This auction method may or may not be the way to go here, but we won't know that for sure unless in the first place everyone involved in the market understands the concept. That's the critical project for Madania Real Estate.
But the auction results don't tell us anything we don't already know about the property market.
By the way, in Sydney the clearance rates (properties sold at auction or by negotiation up to midnight on auction day between highest bidder and vendor) have been at 66% the last two weekends. A third failed to sell at the auction.
You'll find the stories here, here and here.
Tuesday, May 26, 2009
Property slump report
There's a report on the world-wide property slump from Knight Frank which Bloomberg carried and is now in Arabian Business and The Kipp Report and will obviously hit the rest of the local media shortly.
The Bloomberg headline is 'Dubai Leads Global Housing-Market Slump'. At least the Kipp Report is accurate with 'Dubai world’s second worst performing property market'.
In fact the figures for the year to March 31 show Dubai second after Latvia for percentage decrease in property prices, with Dubai down 32%. Singapore's not much better at down 23% and they didn't have the huge increase the previous year that Dubai had - the report also contains the information that prices in Dubai rose the previous year by 48%.
Context folks, context.
Up 48% one year, down 32% the next.
Like anywhere else in the world, if you bought at the peak you'll lose money. I've seen it in the past in Oz, in the UK, in Singapore. People jumping on the property bandwagon at the wrong time and taking a hit. That's simply bad and naive investment.
I've long believed that you make money not when you sell property but when you buy it. Pay the right price for the right property at the right time and you will make money. I've proved it by doing it very successfully several times. When prices went too high I pulled my head in and stopped buying.
If you make a bad investment there's no point complaining and thrashing about blaming someone else. You made the wrong decision and the responsibility is yours.
The report also shows property prices down in thirty one countries with only fourteen showing an increase. Of interest to people here I guess: while India is showing an increase at the long-term par of 5% pa, prices are down in the UK, USA, Philippines, South Africa, Australia and a big chunk of Europe.
Knight Frank's report.
Bloomberg's take on it.
Kipp Report's story.
The Bloomberg headline is 'Dubai Leads Global Housing-Market Slump'. At least the Kipp Report is accurate with 'Dubai world’s second worst performing property market'.
In fact the figures for the year to March 31 show Dubai second after Latvia for percentage decrease in property prices, with Dubai down 32%. Singapore's not much better at down 23% and they didn't have the huge increase the previous year that Dubai had - the report also contains the information that prices in Dubai rose the previous year by 48%.
Context folks, context.
Up 48% one year, down 32% the next.
Like anywhere else in the world, if you bought at the peak you'll lose money. I've seen it in the past in Oz, in the UK, in Singapore. People jumping on the property bandwagon at the wrong time and taking a hit. That's simply bad and naive investment.
I've long believed that you make money not when you sell property but when you buy it. Pay the right price for the right property at the right time and you will make money. I've proved it by doing it very successfully several times. When prices went too high I pulled my head in and stopped buying.
If you make a bad investment there's no point complaining and thrashing about blaming someone else. You made the wrong decision and the responsibility is yours.
The report also shows property prices down in thirty one countries with only fourteen showing an increase. Of interest to people here I guess: while India is showing an increase at the long-term par of 5% pa, prices are down in the UK, USA, Philippines, South Africa, Australia and a big chunk of Europe.
Knight Frank's report.
Bloomberg's take on it.
Kipp Report's story.
Tuesday, April 14, 2009
Whose money is building Dubai?
Something that's come up many times in conversation and on internet forums was raised again recently in a comment left here: Dubai is in trouble...they have over $1T in building projects... Who's funding them?
I've heard so many times: "Without the oil money they wouldn't be able to do it". Recently that's changed to: "Now the oil price has dropped the buildings can't be finished".
Time to put the reality in writing I think.
It isn't Dubai's money.
We need to go back to 2002.
The world was awash with cheap money, it was easy for people to get hold of sacksful of the stuff.
It was soon after 9/11. Arabs were meeting obstacles if they wanted to travel to the west, the US in particular. Bush W's administration and others were freezing assets, alleging terrorist connections. As a result money was being repatriated back into the Middle East.
So all over the world there was a hell of a lot of money looking for a home.
Sheikh Mohammed Bin Rashid announced the freehold era, decreed that foreigners could own property in certain areas.
The timing was not accidental.
So for those who don't know, here's how the whole thing works. I'll give you a practical example, Dubai Marina. It's just one of the many, many developments which have appeared since the decree, and it's typical.
Emaar is the Master Developer. The Dubai Government is the largest shareholder but as the company is listed on the Dubai Stock Exchange it has huge amounts of money from many other investors.
Emaar built the marina and put in the infrastructure. They also built, or are building, something like ten projects, from residential towers to a shopping mall.
But they sold the other 95% of the land to other developers, large and small.
Those developers designed and built residential towers and in turn sold the apartments to investors. Some of these investors are large companies or very wealthy individuals who bought whole floors, or even whole towers. Others are simply ordinary people who bought one apartment, either to live in or as an investment for their future.
It's said the two largest groups of end-investors are Brits and Indians. The properties were certainly aggressively promoted in those two countries.
Dubai Marina is a typical example of the reality of real estate in Dubai. Very little Dubai money is involved, the vast majority is from investors large and small from all over the world.
Government money goes into infrastructure, it's outside investors who are providing the bulk of the money for the buildings. Hundreds of billions of dollars have poured in.
Oh, PS. Oil revenues make up a tiny part of the emirate's economy. It varies with the oil price of course, but it's around 6%.
LATE ADDITION
I've re-read what I'd written thanks to comments from The Real Nick.
A mistake in the fourth para - I should have said "Most of it isn't Dubai's money"
I've heard so many times: "Without the oil money they wouldn't be able to do it". Recently that's changed to: "Now the oil price has dropped the buildings can't be finished".
Time to put the reality in writing I think.
It isn't Dubai's money.
We need to go back to 2002.
The world was awash with cheap money, it was easy for people to get hold of sacksful of the stuff.
It was soon after 9/11. Arabs were meeting obstacles if they wanted to travel to the west, the US in particular. Bush W's administration and others were freezing assets, alleging terrorist connections. As a result money was being repatriated back into the Middle East.
So all over the world there was a hell of a lot of money looking for a home.
Sheikh Mohammed Bin Rashid announced the freehold era, decreed that foreigners could own property in certain areas.
The timing was not accidental.
So for those who don't know, here's how the whole thing works. I'll give you a practical example, Dubai Marina. It's just one of the many, many developments which have appeared since the decree, and it's typical.
Emaar is the Master Developer. The Dubai Government is the largest shareholder but as the company is listed on the Dubai Stock Exchange it has huge amounts of money from many other investors.
Emaar built the marina and put in the infrastructure. They also built, or are building, something like ten projects, from residential towers to a shopping mall.
But they sold the other 95% of the land to other developers, large and small.
Those developers designed and built residential towers and in turn sold the apartments to investors. Some of these investors are large companies or very wealthy individuals who bought whole floors, or even whole towers. Others are simply ordinary people who bought one apartment, either to live in or as an investment for their future.
It's said the two largest groups of end-investors are Brits and Indians. The properties were certainly aggressively promoted in those two countries.
Dubai Marina is a typical example of the reality of real estate in Dubai. Very little Dubai money is involved, the vast majority is from investors large and small from all over the world.
Government money goes into infrastructure, it's outside investors who are providing the bulk of the money for the buildings. Hundreds of billions of dollars have poured in.
Oh, PS. Oil revenues make up a tiny part of the emirate's economy. It varies with the oil price of course, but it's around 6%.
LATE ADDITION
I've re-read what I'd written thanks to comments from The Real Nick.
A mistake in the fourth para - I should have said "Most of it isn't Dubai's money"
Tuesday, February 10, 2009
Room with a (changing) view
I've always believed you buy off-the-plan property at your peril. I've never done it.
It all sounds great, especially the cheaper prices than those you pay for a finished property. But you don't see the finish, you don't see the fittings, you don't see the quality, you can't check the soundproofing.
That applies anywhere in the world, and regardless of the promises of the builder those things can be far poorer in reality than you expected.
In Dubai there's an added problem.
Things you weren't expecting get built around you. Things that weren't even planned when you bought the property.
Dubai Marina has a few examples.
Like suddenly finding a Metro pedestrian bridge right outside your windows...
A new interchange is built out of nowhere, like the new Interchange 5.5 at the Jebel Ali end of the Marina, and one of the flyovers is going past your bedroom....
Interchange 5.5 snakes around to JBR too, so people here are getting a whole different view from the one they expected...
I guess some owners are end users and they'd be the worst affected. But even if the owner is an investor he's been hit. The rental and the sale value will have been badly affected by the new view. And noise. And pollution.
There must be a whole bunch of disgruntled owners out there, with presumably no recourse.
It all sounds great, especially the cheaper prices than those you pay for a finished property. But you don't see the finish, you don't see the fittings, you don't see the quality, you can't check the soundproofing.
That applies anywhere in the world, and regardless of the promises of the builder those things can be far poorer in reality than you expected.
In Dubai there's an added problem.
Things you weren't expecting get built around you. Things that weren't even planned when you bought the property.
Dubai Marina has a few examples.
Like suddenly finding a Metro pedestrian bridge right outside your windows...
A new interchange is built out of nowhere, like the new Interchange 5.5 at the Jebel Ali end of the Marina, and one of the flyovers is going past your bedroom....
Interchange 5.5 snakes around to JBR too, so people here are getting a whole different view from the one they expected...
I guess some owners are end users and they'd be the worst affected. But even if the owner is an investor he's been hit. The rental and the sale value will have been badly affected by the new view. And noise. And pollution.
There must be a whole bunch of disgruntled owners out there, with presumably no recourse.
Monday, February 02, 2009
It's our fault again.
We got it wrong again, causing ourselves unnecessary problems.
I can't believe how many times we get things wrong, misunderstand the facts, cause unnecessary problems for ourselves and others.
We caused problems for the RTA over Salik. We caused problems for the EIDA over the ID card.
Now we've misunderstood the 'One Villa - One Family' campaign.
We believed that 'one villa one family' meant, well, 'one villa one family'...but of course it didn't.
We misunderstood.
There is no "one villa, one family" rule in Dubai and the campaign against overcrowded villas has been misunderstood, a top civil official said on Sunday(February 1st).
In our defence I suppose our lack of understanding - and I know it's pushing the boundaries of credibility - but it just may have been based on the earlier official announcements and the facts on the ground.
The campaign was launched in April. By July there were reports that:
Families living in shared villa accommodations in the Jumeirah-1 and Abu Hail areas have been asked to vacate under Dubai Municipality's ongoing 'One Villa-One Family' campaign.
Since the launch of the campaign in April, almost 2,400 eviction notices have been served to families living in villas in the Rashidiya area, and water and electricity supply to 280 villas have been disconnected.
In September I reproduced a DM advertisement which clearly stated that within thirty days from that announcement it was obligatory to vacate multi-families.
And then on October 3, 2008:
The Municipality’s ‘One Villa, One Family’ campaign kicked off this week with inspectors combing through villas in Al Rashidiya area, an official said.
"We study every case individually. However, the rule we enforce is one family per villa.
"Family only refers to immediate family, as in father, mother, spouse, children, brother and sister. No uncles, cousins or in-laws."
He added that if the brother or sister of the resident was married and had his family living in the same house, then even that would be considered a violation of the law.
In November we read that:
Dubai Municipality is cutting power and water to as many as 200 villas a week in an attempt to evict people who are sharing homes, but some of the tenants are defying authorities and illegally reconnecting services, a senior official said yesterday.
I'm going to plead mitigating circumstances for my stupidity in thinking that this meant there was a rule that families cannot share accommodation.
You see, the campaign was entitled 'One Villa - One Family' and a senior official specified exactly how closely related family members needed to be to qualify. Services were cut off, people were evicted and fines up to Dh50,000 were imposed under the rule.
We stupidly misunderstood it all.
February 1st, 2009:
Hussain Nasser Lootah, Director General of Dubai Municipality said the municipality did not have any problem with more than one family living in a villa, provided it was big enough.
"The municipality has started a campaign against overcrowding in villas to ensure the safety and security of residents."
Now do you understand?
Families evicted.
Clarification of what a family means.
DM cuts off 200 villas a week.
There is no rule.
I can't believe how many times we get things wrong, misunderstand the facts, cause unnecessary problems for ourselves and others.
We caused problems for the RTA over Salik. We caused problems for the EIDA over the ID card.
Now we've misunderstood the 'One Villa - One Family' campaign.
We believed that 'one villa one family' meant, well, 'one villa one family'...but of course it didn't.
We misunderstood.
There is no "one villa, one family" rule in Dubai and the campaign against overcrowded villas has been misunderstood, a top civil official said on Sunday(February 1st).
In our defence I suppose our lack of understanding - and I know it's pushing the boundaries of credibility - but it just may have been based on the earlier official announcements and the facts on the ground.
The campaign was launched in April. By July there were reports that:
Families living in shared villa accommodations in the Jumeirah-1 and Abu Hail areas have been asked to vacate under Dubai Municipality's ongoing 'One Villa-One Family' campaign.
Since the launch of the campaign in April, almost 2,400 eviction notices have been served to families living in villas in the Rashidiya area, and water and electricity supply to 280 villas have been disconnected.
In September I reproduced a DM advertisement which clearly stated that within thirty days from that announcement it was obligatory to vacate multi-families.
And then on October 3, 2008:
The Municipality’s ‘One Villa, One Family’ campaign kicked off this week with inspectors combing through villas in Al Rashidiya area, an official said.
"We study every case individually. However, the rule we enforce is one family per villa.
"Family only refers to immediate family, as in father, mother, spouse, children, brother and sister. No uncles, cousins or in-laws."
He added that if the brother or sister of the resident was married and had his family living in the same house, then even that would be considered a violation of the law.
In November we read that:
Dubai Municipality is cutting power and water to as many as 200 villas a week in an attempt to evict people who are sharing homes, but some of the tenants are defying authorities and illegally reconnecting services, a senior official said yesterday.
I'm going to plead mitigating circumstances for my stupidity in thinking that this meant there was a rule that families cannot share accommodation.
You see, the campaign was entitled 'One Villa - One Family' and a senior official specified exactly how closely related family members needed to be to qualify. Services were cut off, people were evicted and fines up to Dh50,000 were imposed under the rule.
We stupidly misunderstood it all.
February 1st, 2009:
Hussain Nasser Lootah, Director General of Dubai Municipality said the municipality did not have any problem with more than one family living in a villa, provided it was big enough.
"The municipality has started a campaign against overcrowding in villas to ensure the safety and security of residents."
Now do you understand?
Families evicted.
Clarification of what a family means.
DM cuts off 200 villas a week.
There is no rule.
Tuesday, January 27, 2009
I hope I'm right.
Another landmark from the (my) old days in Dubai.
Lincoln Beach Villas on Jumeirah Beach Road, a bit out of town in those days but highly desirable. They were occupied by expats on the full salary package which included good accommodation with all bills paid.
Those were the days.
A few people are still on those packages but they're becoming rarer and rarer.
Anyway, passing by this morning I was horrified to see construction/destruction.
On closer inspection it seemed as though it was actually renovation going on.
I do hope so, rather than the usual demolition of anything over twenty years old.
Lincoln Beach Villas on Jumeirah Beach Road, a bit out of town in those days but highly desirable. They were occupied by expats on the full salary package which included good accommodation with all bills paid.
Those were the days.
A few people are still on those packages but they're becoming rarer and rarer.
Anyway, passing by this morning I was horrified to see construction/destruction.
On closer inspection it seemed as though it was actually renovation going on.
I do hope so, rather than the usual demolition of anything over twenty years old.
Thursday, January 22, 2009
Rent situation explained
After an inevitable couple of days of confusion following the first incomplete announcement we now seem to have clear clarification of the rent freeze/increase issue.
On the surface there's some confusion because we have both a freeze and a 20% cap on increases, but it's actually explained reasonably well.
Gulf News has a very good report with details, many examples of average rents and an interactive map on which different areas' rents can be checked.
It also has the wording of the full decree issued by Sheikh Mohammed Bin Rashid, which is very useful.
The appropriate rent for an area is based on the new Rent Index issued by RERA, the Real Estate Regulatory Authority. In turn that's based on rent information submitted by landlords and tenants to the RERA website www.ejari.ae. Last year registration was voluntary, from the beginning of this year it's been compulsory but my guess is that many leases have not been registered.
Put simply, if the 2008 lease is being renewed and it has a rent within 25% of the index it can't be increased. If the rent is more than 25% below the index there's a sliding scale of maximum percentages by which it can be increased based on how much below it is, the maximum being 20% for rents which are 56% or more below the index.
It's a good start but I think renters have will have to be a bit patient with it, because it's going to take a while to get it all up-to-date and working efficiently.
What we have as the basis for the whole calculation is an index based on a small number of the actual leases out there and based on last year's rents, which are now way out of date. The report says, for example, a two bedroom apartment in Mirdif is shown in the index at Dh120,000 to Dh130,000 while the actual rent now is around Dh90,000.
Article (4) (2) of the decree says that RERA "shall review and update the Rent Index of the emirate of Dubai periodically" and that obviously needs to be done quickly and frequently, I would say at least quarterly. For it to truly reflect what's happening they also must ensure that all leases are registered.
Not everyone will be happy of course because the index will in the present climate almost certainly be showing lower rents each time it's updated. What you pay will be based on what the index says on the day you sign, so people signing later in the year can expect to pay less than those signing at the beginning.
Not perfect but it does address one of the major problems companies and individuals have struggled with over the last few years, and one of the biggest contributors to our high inflation rate. It's one of those times when market forces couldn't be left in control and government intervention was necessary.
Check out the full information in Gulf News. The main report is here and it has links to the other pages.
On the surface there's some confusion because we have both a freeze and a 20% cap on increases, but it's actually explained reasonably well.
Gulf News has a very good report with details, many examples of average rents and an interactive map on which different areas' rents can be checked.
It also has the wording of the full decree issued by Sheikh Mohammed Bin Rashid, which is very useful.
The appropriate rent for an area is based on the new Rent Index issued by RERA, the Real Estate Regulatory Authority. In turn that's based on rent information submitted by landlords and tenants to the RERA website www.ejari.ae. Last year registration was voluntary, from the beginning of this year it's been compulsory but my guess is that many leases have not been registered.
Put simply, if the 2008 lease is being renewed and it has a rent within 25% of the index it can't be increased. If the rent is more than 25% below the index there's a sliding scale of maximum percentages by which it can be increased based on how much below it is, the maximum being 20% for rents which are 56% or more below the index.
It's a good start but I think renters have will have to be a bit patient with it, because it's going to take a while to get it all up-to-date and working efficiently.
What we have as the basis for the whole calculation is an index based on a small number of the actual leases out there and based on last year's rents, which are now way out of date. The report says, for example, a two bedroom apartment in Mirdif is shown in the index at Dh120,000 to Dh130,000 while the actual rent now is around Dh90,000.
Article (4) (2) of the decree says that RERA "shall review and update the Rent Index of the emirate of Dubai periodically" and that obviously needs to be done quickly and frequently, I would say at least quarterly. For it to truly reflect what's happening they also must ensure that all leases are registered.
Not everyone will be happy of course because the index will in the present climate almost certainly be showing lower rents each time it's updated. What you pay will be based on what the index says on the day you sign, so people signing later in the year can expect to pay less than those signing at the beginning.
Not perfect but it does address one of the major problems companies and individuals have struggled with over the last few years, and one of the biggest contributors to our high inflation rate. It's one of those times when market forces couldn't be left in control and government intervention was necessary.
Check out the full information in Gulf News. The main report is here and it has links to the other pages.
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