Dubai property is hot once again, will history repeat itself?
- Published on Sunday, 21 April 2013 10:06
- 2 Comments
Who could resist the offer of a three-bedroom townhouse for less than Dh1 million? Not many, to judge by the scenes yesterday at the developer Emaar’s offices in Dubai.
Police were called for a second day to control a crush of hundreds of people eager to buy. By 6am more than 500 people crowded around the entrance of the company’s office in Emaar Square. The previous evening, officers were called to control the huge crowd.
When the sale opened yesterday morning with only a few people allowed into the building, others began to push forward to try to get through. “It was crazy, there was no line, it was just a large crowd of people trying to push through,” said Surya Khanal, from Nepal, who had been there since 5.30am.
“There were at least 500 people here in the morning and only Emaar security holding them back.“
Emaar temporarily halted the sales and police were called. About 10 patrol cars arrived at the scene with an ambulance.
Order was restored and by 10.30am the crowd had been divided into separate queues for men and women. “Once the police arrived people began to behave themselves and they lined up quietly,” said Mr Khanal.
Although calm was restored, the sapping 35°C heat took its toll. One woman collapsed and had to be treated by ambulance staff.
The huge demand is for 188 off-plan townhouses in the Mira development near Arabian Ranches and Global Village, expected to be completed by 2016.
Prices were to be just under Dh1 million for a three-bedroom home, but had increased by the time the sale was opened to the public.
“I managed to get a corner house for Dh1.3 million, which I’m pretty happy with,” said Rajeev Raja, an Indian sales manager.
Buyers were asked to pay a Dh3,000 deposit and provide a postdated cheque for Dh50,000. “This property is for personal use and I’m not planning to sell it,” Mr Raja said.
Many waiting in the queue criticised the management of the sale. “They should have done an online registration, that way only the buyers would have come and there would not have been this situation,” said an Indian businessman, who had gone directly to the office after arriving on a flight from Munich at 6.30am.
On Friday evening police had to disperse more than 400 people, mainly labourers and workers paid to stand in line for prospective buyers.
“I have also seen people who bought a property coming straight out of the Emaar office and selling it to other people outside with a 10 to 15 per cent premium,” said the Indian businessman.
Read the full story from The National.
People are once again rushing to buy Dubai property. For some, buying property in Dubai makes sense, such as Emiratis or expats who plan on living in the country long-term. However, this has not stopped speculators to getting into the market hoping to make easy money.
Flippers are in action, once again. This time property agents started putting adverts for sale of units in Burj Vista, a luxurious twin-tower project in Downtown Dubai just a few hours after the launch took place on Saturday.
According to adverts posted on dubizzle.com, First Class Real Estate Brokers is selling a two-bed apartment (1,012 square feet) for Dh1.98 million or Dh2,470 per square feet, while Distinct Real Estate is selling a one-bed unit at Dh1.5m or Dh2,000 per square feet.
However, agents have not mentioned the premium they are charging. Emirates24|7 reported on Saturday that on average sale prices were in the range of Dh2,000 per square feet.
On April 15, Emirates24|7 reported buyers had started to flip units in Mira townhouse development, seeking premiums of 12 to 20 per cent regardless of there being a 18 month lock in period during which investors are prohibited from transferring the property.
An online portal has got several listings of the three-bedroom town houses in Mira development near Arabian Ranches. A brokerage firm, Distinct Real Estate, is asking anywhere between 12 and 20 per cent premium and has posted several adverts on dubizzle.com.
In July 2012, the Dubai Land Department had urged developers launching new projects to “discourage” investors from re-selling “off plan” properties unless the project has reached an advanced stage of construction.
“We don’t have any regulation to prevent people from reselling their property. The developer should discourage people from selling off-plan until the project has reached an advanced stage,” the department said in response to a query by Emirates 24|7.
Despite, Emaar not allowing any transfer of property until the investor has made 40 per cent payment, property agents offer facilities such as a power of attorney that authorizes transfer of ownership to the buyer on completion of the aforementioned amount.
Burj Vista, the twin-tower project, will be completed in June 2017.
The payment terms offered by the company are as follows: 15 per cent down payment; 10 per cent in September 2013; 15 per cent in March 2014; 10 per cent each in March and November 2015; 10 per cent in March and 15 per cent in November 2016 and 15 per cent on completion in June 2017.
Read the full story from Emirates 24/7.
Mobs of people rushing to buy apartments and townhouses that have yet to be built is crazy. These properties are not expected to be finished for another three to four years… and people have a very short-term memory. The last time around, developers were famous for delivering properties years late. Some people who bought in 2007/2008 are still waiting for their finished apartment or villa to be delivered. Why? Because they bought off-plan just like these people today. Delays happen, financing hiccups happen and financial crisis happen, which can all cause trouble for buyers (or the flippers caught without a seat once the music stops).
Also keep in mind that the Dubai property market is new by international standards having began only in 2002. The laws are new, not up to par with developed market standards and have not had enough time to be properly tested.
During the financial crisis, foreign speculators holding multiple mortgages for properties yet to be built were forced to flee the country or face jail time. These speculators were caught in the middle of flipping their properties when lending dried up. They never had plans of making any mortgage payments (nor could they with their debt loads) so once buyers disappeared, they defaulted on their payments.
Banks today cleaned up their act a bit, but they are too tempted to get back in the game, especially since loan growth has been weak for years. See our earlier posts on bank lending here, here and here. There is also a new wave of buyers in town; cash buyers. Cash buyers are those looking to take their wealth out of their country because of instability, uncertainty or other severe economic or political situation. Cash buyers today tend to come from Iran, Pakistan, Egypt and Central Asian countries.
The property market today has upside potential, especially since the banks haven’t jumped in again with both feet. Once they do, it will be a good sign that another top is in. With economic uncertainty still circling the globe, any economic slowdown or even a mild recession can put a stop to this market again.