Buyers queuing overnight as demand booms for Dubai real estate
Posted on 28 May 2008 with no comments from readers
Negative real interest rates courtesy of a dollar-peg, high oil prices, not a little media attention and still attractive price levels are keeping Dubai real estate booming. It is a total contrast to most global property markets where activity has slowed or is in recession.
New project launches in the right locations sell out quickly. Yesterday Deyaar Developments announced the sell-out of its Mirar Residences, one of three towers in the DuBiotech business park, despite the recent arrest of its top management team for alleged embezzlement.
Not all buyers are so lucky. The National reported this week that ‘hundreds of potential buyers, some of whom had specially flown into the country, were turned away by Nakheel yesterday after the waterfront property they were after sold out.
’Overwhelming interest in Nakheel’s Badrah waterfront developments led to the cancellation of about 400 appointments with potential buyers. Badrah is a district with 45,000 homes, and Nakheel sold about 1,000 apartments on Sunday, the first day of a planned two-day sale, an official said. Another 60 apartments left over from Sunday were released to some customers yesterday, but the remaining hundreds of potential buyers missed out.’
There is indeed considerable competition to buy in favorable locations. Even the 10-kilometre desert hotel strip project Bawadi had people queuing for 14 hours by buy homes in its joint venture with Emaar Properties. The lucky 120 slept overnight to keep their places in the queue, and disappointed people were told to come back for the next phase of sales.
This is almost nostalgic for an early buyer of Dubai property like myself! Five years ago I was one of the thousand buyers who queued at the Godolphin Ballroom at the Emirates Towers to buy a villa in The Meadows. We thought it was madness but property prices have quadrupled since then.
But Dubai property prices remain 25 per cent cheaper than a London suburb with take-home pay levels rather higher and a great many bankers looking to relocate here in the near future. Personally I think prices have higher to go as completed property is in very short supply, and there is plenty of demand to soak up new real estate completions for another year or two.
No boom last forever, but this one is getting hotter this summer! I can’t see the heat subsiding at least until the Burj Dubai, the world’s tallest building is topped out next summer. The illustration above compares this awesome skyscraper to the holder of the tallest building title in Taipei.
no Comments posted by readers:
This bubble will burst too.
Late 2008/early 2009.
Plan accordingly.
PJC – enjoy reading your stuff, also notice you post comments on AEP of the Daily Telegraph.
Question: If the Dhs/US$ currency peg is removed at some point in the near future – what then happens to bank Dhs mortgage lending rates in the UAE? Presumably they increase?
Given that US$ interest rates are at 2%, and the UAE banks can borrow at this and are lending in the local market at around 7% for mortgages (significant profit), will they hold or will they raise them. Raising them would I feel have an impact on the overheated property market.
Bank mortgage rates are already high in the UAE so I doubt it would make much difference – they really ought to be falling in the current market but the demand for funds is so high that they do not need to (and are making huge profits instead)- raising rates would cool the market.
But the reverse is going to happen. The Fed will have to cut rates to near zero as phase two of the credit crisis hits. UAE rates will follow, home loans will be cheaper and the bubble inflate further.
The long queues and the manic buying seen recently does look similar to the first launch of villas by emaar. But there is one big difference between the two situation,which, if taken in isolation, gives us a complete different view of property outlook. The earlier queues were by people who had the money and willingness to hold these properties beyond its completion time. This contrast with current lot of buyers who are just looking to make quick money by buying properties on launch.Majority of them neither have the money nor the willingess to hold even for the next installment. So while earlier rush was a bullish sign, this rush is a reason to be wary about the market, I think.
A nice point, if only it was true! I remember the original buyers and probably the majority sold the properties on before they were completed. I remember standing in the queue and thinking ‘why is that guy over there buying five villas, he can’t possibly pay for them!’ So I would not think it that much different now, indeed with prices higher today there may be less people speculating and more looking for a way out of high rents by owning a home.
Re Schon: post # 1267 is quite interesting!