Correction or Crash?

[dubister]

Property prices on Palm Jebel Ali fall by up to 40%

by Claire Ferris-Lay and Dylan BowmanThis email address is being protected from spam bots, you need Javascript enabled to view it on Thursday, 06 November 2008

PALM PRICES: Investors in off-plan properties on the Palm Jebel Ali have been forced to reduce prices to find a buyer, agents say.
PALM PRICES: Investors in off-plan properties on the Palm Jebel Ali have been forced to reduce prices to find a buyer, agents say.

House prices on the Palm Jebel Ali, second largest of Nakheel’s palm-shaped islands, have fallen by as much as 40 percent in the last two months as the global financial crisis sees foreign investors move to liquidate assets in Dubai, according to three Dubai-based real estate agents.

“I never expected [prices on the Palm Jebel Ali] would have come back so quickly and by so much,” said Jeroen Van Der Geer, partner at AA Properties in Dubai. “We are back to a level of one and a half to two years ago.”

The global financial crisis has hit demand from foreign investors, which make up a large percentage of property buyers in Dubai, while tightening liquidity has made home financing more difficult, agents said.
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Local mortgage providers have slashed home financing from 90 percent to as little as 60 percent in recent weeks.

The price of five and six bedroom signature villas, the most expensive properties on Palm Jebel Ali, have dropped from around 16 million dirhams ($4.35 million) to 9 million dirhams since the beginning of September, according to figures from AA Properties.

But that still represents a premium of between 70 percent to 80 percent on the original launch prices.

A four-bed garden home has fallen from around 7.4 million dirhams to 4.1 million dirhams, according to the figures, with the premium dropping from around 160 percent to 45 percent.

The figures show a three-bed water home, the cheaper of the Palm Jebel Ali properties, is now selling for around 3.8 million dirhams, when at the beginning of September it was selling for 6.2 million dirhams, with the premium falling from about 210 percent to 90 percent.

Jodie Smith, managing director of Elysian Real Estate, said garden homes were currently selling at around 4.5 million dirhams, compared to 8.6 million at the beginning of September, while water homes had come down to around 4 million dirhams from 6.5 million dirhams.

David Rowland, sales consultant at Dubai’s Smith & Ken Real Estate, said he had seen premiums on signature villas drop from 200-210 percent in July/August to 75-80 percent currently.

Rowland said he had also seen garden homes selling at a 35-40 percent premium, compared to 130-160 percent in July/August.

He described the drop as “quite alarming”.

Rowland said sales had not completely dried up on the Palm Jebel Ali, but investors were having to accept premiums of around 35-40 percent to make a sale.

Rowland said premiums could go as low as 20 percent before property prices rebound.

“I think we will see a rebound. Palm Jebel Ali may go down to as low as 20 percent [premium]. When it does we will see people start to come back to the market, maybe in December,” he said.

Van Der Geer said he expected demand for properties on Palm Jebel Ali return before Christmas as global financial markets stabilise and investor confidence begins to return.

“It is a good opportunity for investors now and I believe the [long-term] picture is good. Prices will go back up,” he said.

Smith said she had already seen sales pick up this week, with investors taking advantage of bargain prices to snap up properties that just a few months ago were out of their price range.

Nakheel said in a statement that it welcomed “all proposals and discussions by all industry-related partners aimed at maintaining a healthy market movement under the current circumstances”.

“Nakheel realises that it does not work in isolation and has a great number of partners and third parties whose interests are intertwined with its own. This approach is a very responsible approach in line with current global economic conditions,” the developer said.

Property prices on Palm Jebel Ali fall by up to 40% - Real Estate - ArabianBusiness.com

[sasherwani2]

For those expecting the prices to go back up, I have just one question.. why do you think the prices shall go up? There is absolutely no liquidity in the market and the recession hasn't even started yet. What makes you guys believe that Dubai is immune to any extrenal negative forces. I admit that Dubai maybe less affected by the US sneeze, but Dubai in the end is an investor's market. Investors that belong to all parts of the globe. With the commodity prices crashing down like crazy, unemployment rate increasing the world over, stock markets plunging daily liquidity will become more and more scarce. There are "NO" buyers in the market currently except for very few end-users (I dont consider end-users investors anyway). Anyhow, wake up guys we aren't even close to the rock-bottom, infact the journey down has just begun!

[georgihh]

Originally Posted by sasherwani2

For those expecting the prices to go back up, I have just one question.. why do you think the prices shall go up? There is absolutely no liquidity in the market and the recession hasn't even started yet. What makes you guys believe that Dubai is immune to any extrenal negative forces. I admit that Dubai maybe less affected by the US sneeze, but Dubai in the end is an investor's market. Investors that belong to all parts of the globe. With the commodity prices crashing down like crazy, unemployment rate increasing the world over, stock markets plunging daily liquidity will become more and more scarce. There are "NO" buyers in the market currently except for very few end-users (I dont consider end-users investors anyway). Anyhow, wake up guys we aren't even close to the rock-bottom, infact the journey down has just begun!

Looks like you are one of the knowledgeable persons in this forum
When do you expect the market to bottom and how much more?
I am particularly interested to know if the prices of the complete units in IC and DSO will go down and by how much?

[sasherwani2]

Originally Posted by georgihh

Looks like you are one of the knowledgeable persons in this forum
When do you expect the market to bottom and how much more?
I am particularly interested to know if the prices of the complete units in IC and DSO will go down and by how much?

I dont want to hurt the investor sentiments by my so-called "negative" views about the market but the fact is, there will be a correction and a very intense one. The correction will show the mirror to all the projects. The good quality projects from good developers located in good locations wont face a correction of more than 25-30% unless they are highly overpriced. However for projects like IC, DGardens, Badrah, Warsan, Mushrif Heights etc massive corrections are on the card either due to their location or due to their construction quality. I strongly feel Warsan and Mushrif Heights will be cancelled. Badrah and IC prices will slash down by 50% and the DGardens by 40%. Badrah, IC and DG was never meant to be this expensive. Corruption, intentional launch and delivery delays and speculators have made it expensive. Badrah still calls itself a "mid-income household project" but is selling studios at AED 1M+ at the launch. I dont know much about DSO except for it was supposed to be the new "Internet City" of dubai but not many noteworthy companies have shown interest in relocating there.
I expect the crash to happen in Q2 of 2009 probably in April or May. This is when the Q1 results for the big property companies are released and a huge panic will immerse when debts will incline and the profits shall decline. Already strict measures are being taken by these developers by firing a big part of their work forces.

[dubister]

Originally Posted by sasherwani2

I dont want to hurt the investor sentiments by my so-called "negative" views about the market but the fact is, there will be a correction and a very intense one. The correction will show the mirror to all the projects. The good quality projects from good developers located in good locations wont face a correction of more than 25-30% unless they are highly overpriced. However for projects like IC, DGardens, Badrah, Warsan, Mushrif Heights etc massive corrections are on the card either due to their location or due to their construction quality. I strongly feel Warsan and Mushrif Heights will be cancelled. Badrah and IC prices will slash down by 50% and the DGardens by 40%. Badrah, IC and DG was never meant to be this expensive. Corruption, intentional launch and delivery delays and speculators have made it expensive. Badrah still calls itself a "mid-income household project" but is selling studios at AED 1M+ at the launch. I dont know much about DSO except for it was supposed to be the new "Internet City" of dubai but not many noteworthy companies have shown interest in relocating there.
I expect the crash to happen in Q2 of 2009 probably in April or May. This is when the Q1 results for the big property companies are released and a huge panic will immerse when debts will incline and the profits shall decline. Already strict measures are being taken by these developers by firing a big part of their work forces.

I agree, Q1 of the 2009 could be a disaster. Right now we seeing market surviving because market indicators show positive numbers which are skewed due to 2008 Q3/Q4 earinings.

It think the govt has to jump in to save the honest, non-greedy, investors and expat end-users alike who put in everything they had and entrusted... If they dont', there will be bad debt across the board. I hope the govt understands the repercussions of it..... and have a plan in place to avoid that.

Lastly, with Obama in office and now that everyone in the world knows and it is prooven, that USA controls the world market; we should be even more wary. Because we will see a huge pull back in the coming year from the U.S govt on foreign outsourcing etc; that is no. 1 agenda on his administrations priorities. Thus, when the USA pulls back to serve its own people, investments change route to the u.s again, and obviously the emerging countries like UAE get hurt.... this is just my theory.

[georgihh]

Originally Posted by sasherwani2

I dont want to hurt the investor sentiments by my so-called "negative" views about the market but the fact is, there will be a correction and a very intense one. The correction will show the mirror to all the projects. The good quality projects from good developers located in good locations wont face a correction of more than 25-30% unless they are highly overpriced. However for projects like IC, DGardens, Badrah, Warsan, Mushrif Heights etc massive corrections are on the card either due to their location or due to their construction quality. I strongly feel Warsan and Mushrif Heights will be cancelled. Badrah and IC prices will slash down by 50% and the DGardens by 40%. Badrah, IC and DG was never meant to be this expensive. Corruption, intentional launch and delivery delays and speculators have made it expensive. Badrah still calls itself a "mid-income household project" but is selling studios at AED 1M+ at the launch. I dont know much about DSO except for it was supposed to be the new "Internet City" of dubai but not many noteworthy companies have shown interest in relocating there.
I expect the crash to happen in Q2 of 2009 probably in April or May. This is when the Q1 results for the big property companies are released and a huge panic will immerse when debts will incline and the profits shall decline. Already strict measures are being taken by these developers by firing a big part of their work forces.

The above figures could happen but only if the rents go down by 50%.
The demand for ready property is yet to be overcome.
With the new law and demolishing old areas I don’t see it happening for at least two years.
DG and IC are like a bank you put your money and get 15% interest per year.
Pakistanis are buying like crazy in these developments and they don’t like losing money.
Tough Badrah is not built yet and prices might fall very quickly.
At the time when cash is a king nobody buys for the future they want results now..
Emaar has lost already huge amount of money and Warsan and Mishrif are the last strongholds and I don’t think they will surrender very easy.
Actually the picture is clear – if somebody doesn’t pump cash in the Dubai real estate very soon, you can say goodbye Dubai, but if money comes will be back to normal not immediately but in a year time

[georgihh]

Its only correction
Crash will be when you see the prices from 2006.
The correction is about to end and we will see minor price increase or decrease during the next 12 months.
A lot of people cashed up already and they can’t keep the cash forever they will bring it slowly back during the next year.

[sasherwani2]

Originally Posted by georgihh

Its only correction
Crash will be when you see the prices from 2006.
The correction is about to end and we will see minor price increase or decrease during the next 12 months.
A lot of people cashed up already and they can’t keep the cash forever they will bring it slowly back during the next year.

Its better to have cash than to have a bad investment. Noone will invest till atleast a year after they feel that the market has reached its bottom. Currently the market has just begun the fall. Emaar is deferring payments for clients because it KNOWS no sensible client is willing to pay a single penny more on their overpriced properties. The picture will get clearer in the coming days.

[mpat]

Originally Posted by sasherwani2

Its better to have cash than to have a bad investment. Noone will invest till atleast a year after they feel that the market has reached its bottom. Currently the market has just begun the fall. Emaar is deferring payments for clients because it KNOWS no sensible client is willing to pay a single penny more on their overpriced properties. The picture will get clearer in the coming days.

Hi sasherwani

Do you think it is possible to talk to the developer and put the payment for which we gave pdc ( post dated cheques ) on hold due to the DELAYS ??? I already got 2 extensions on my payment plan due to the delays. now its completing in Dec 9 , but the project will be handed over in first or second quarter of 10.

Thanks

[sasherwani2]

Originally Posted by mpat

Hi sasherwani

Do you think it is possible to talk to the developer and put the payment for which we gave pdc ( post dated cheques ) on hold due to the DELAYS ??? I already got 2 extensions on my payment plan due to the delays. now its completing in Dec 9 , but the project will be handed over in first or second quarter of 10.

Thanks

Depends on your developer. Good developers are listening to all reasonable requests of their clients to avoid bad publicity and to avoid seevre disruption in cashflows. Talk to your developer. I'm sure they will agree to your terms.