Dubai property inventory: villas four years, apartments three
Posted on 22 October 2009 with no comments from readers
A conservative calculation of the property inventory in Dubai suggests that the city presently has a four-year supply of villas and three-year supply of apartments.
Last week saw sales of 12 villas and 278 apartments, according to the Dubai Land Department. The classified sales website dubizzle.com presently lists 2,459 villas and 7,429 apartments for sale; and the lowest forecast for Dubai apartment completions is around 35,000 by the end of next year.
Crunch that data, and to be fair the sales last week are in the peak season and above the average weekly total for this year, and you arrive at a very hefty property supply.
Over-building
This is the over-building from the boom years that the local property market now has to digest. It is not helped by the falling population of Dubai, partly indeed due to the collapse of the real estate and construction boom.
Figures published earlier this week showing a 70,000 net loss of customers by UAE telecoms giant Etisalat in the second quarter are the best indicator yet of the decline in Dubai’s population. Given the relative resilience of the Abu Dhabi economy it is a reasonable assumption that most of these lost customers are in Dubai, and besides customer losses by the second operator du are not included.
Again on a conservative assumption this data suggests a four to five per cent decline in the Dubai population.
Now both a large and rising inventory of property for sale and a declining population do not square well with talk of a market recovery, or even stabilization. The stabilization looks more like a pick up in demand from a very poor summer, rather than a meaningful market trend.
Tight credit
And at the same time credit remains tight across the board for Dubai real estate. One Springs seller sold their three-bedroom villa twice recently for AED1.9 million, only for the buyers to fail to get mortgage applications approved, and finally accepted a cash offer of AED1.55 million.
For while it is true that lenders like Standard Chartered Bank have brought mortgage rates down as low as 6.6 per cent, still above US home loan rates despite the dollar-peg, loan-to-value ratios are tight and that is the value decided by the bank not the buyer.
So although it is reassuring to hear from the UAE Central Bank governor Sultan bin Nasser Al Suwaidi that UAE interest rates will not go up until the US raises its rates, there is much more than could be done to ease the home loan market to help absorb the upcoming and existing supply of unsold property.
no Comments posted by readers:
About time someone published an article on the glaringly obvious facts. You know, just about every other UAE publication is painting roses all over it.
It is counterproductive of local publications and authorities trying to obscure facts in the hope of keeping hot air in the bubble. The quicker it is allowed to find it’s real bottom the sooner it will begin sustainable recovery.
I was building a 6 meter plywood powerboat 35 years ago in New Orleans. For the only time that I can remember, dust got blown into the city. I think they said that it came from Texas. It only put a tiny layer of redish dust on everything, but was enough of a mess to discourage me from ever living anywhere subject to blowing dust. I had to vacuum out the entire inside of the boat, before I could put on another layer of paint. Just my luck. No Middle East real estate for me.
A man named Sam Carr lived next door to me, when I was a child growing up in New Orleans. He was in the US Army from El Paso Texas, and always said that he would move back there when he retired. After he moved away, my parents kept in touch for the rest of their lives. When asked why he eventually retired in Coco Beach, Florida he said, “We got tired of eating dust in Texas.” Robert Allen Carr, I hope you’re having a great life.
I believe one of the main reasons everyone decided to sell their properties were for for 3 main reasons:
1) Many people were unaware of the ridiculous community fees that they had to pay after they received their units. I for one am one of them after finding out that my unit in JLT would cost me an arm and a leg in community fees every year which was worse than paying taxes on a home in the US every year.
2) Many buyers were promised financing by the developers half way through the construction process. Saba in JLT had promised this to all their buyers. People in sales at the time said that Amlak and Tamweel would do financing and we all saw what happened to Amlak and Tamweel. In the most of the buyers were unable to get financing so those desperate for cash or unable to pay for the unit in full cash had to dump in the end. Others were able to hold out longer but when they too found out that banks were not lending they had no choice except to sell their units and when buyers for their units were unable to get loans this meant that they had to accept a much lower price for their unit.
3)Last but not least was the residency status for visas. When I bought both of my units in Saba at JLT I was promised residency visas for me and my family. Upon handover I found out that every person had to pay a ridiculous fee every single year for the residency visa.
Unless a person has a tree in their yard growing money to pay the above yearly fees and could manage everything without any loans then every sign out there pointed to a big property crash coming which was why I had sold my units and others as well.
I am quite confident that if loans were being given out (with reasonable interest rates that is),lower annual community fees for these apartments and villas along with residency visas being issued for home owners then we would not have seen this level of sell-offs taken place (and still taking). The fact is that they made Dubai too expensive to afford for your average John Doe or Dubai’s market would not have come crashing down.
Ed Note: Ask yourself if it was not you that just got carried away? The market has corrected from such excessive optimism and probably is not done yet. Service charges on apartments are levied everywhere, you should have taken this into account. Mortgage costs in an emerging market are always going to be much higher than in a developed market. And as for residency fees, we all have to pay them here and that is a failure in your due diligence – why would any country want residents who pay no taxes, you surely have to contribute something to live in a place? You seem to have been misled by the developer selling your property – but then a seller is not usually the best authority for accurate information on a product.