Dubai real estate

I have been consistently wrong about property in Dubai. Mrs Saul has been consistently right. Fortunately, as we are a team and she is team captain, we bought a property.

Owning our own property has insulated us from the problems lots of our friends have had, namely having to leave their villas or apartments, or being forced to accept huge increases in the rent they have to pay. On the flipside, lovely though our apartment is, we have had to deal with increases in service fees and frustrating quality issues. It is not only costing us far more to live here compared to our last place, it’s costing us far more than we had expected. When you’re promised 8Dhs per square foot in 2004 you budget accordingly and add some room for increases. When 2008 comes around and you’re made to pay 35Dhs per square foot, plus 10,000Dhs a year for a municipality tax noone told you about, your costs go up more than you had planned for.

Not that we’d be better off if we’d stayed where we were – all the parking has disappeared and three new towers have been built right next to our old building. What used to combine the advantages of living in a modern tower with a quiet neighbourhood and plenty of space has now become more crowded and, in my opinion, far less desirable a place to live. We’d be saving money, but would be cramped and miserable.

The articles mention problems with supply and demand in Dubai, yet there appear to be hundreds of empty apartments in most of the new developments. I can’t work out why this is – are they owned by investors, simply waiting to sell them on? Are they owned by people in neighbouring countries who need a bolthole should Sarah Palin decide to drop a moose on Iran?

I think part of the reason may be a general desire among landlords to leave a property empty rather than reduce the rental price. In London, I’d expect rents to go up and down, based on supply and demand. Most buy-to-let landlords have mortgages to pay, so have to accept a tenant at some point, even if the price isn’t as high as they’d like. I presume people who’ve paid for these apartments outright in cash simply have no pressure to get tenants in if they don’t like the price.

Another contributing factor seems to be the willingness of certain companies to pay whatever it costs to get top staff over here. That willingness generally raises prices. There seem to be two tiers of new arrivals from Europe at the moment. Top level blue chip types who get paid the full expat-whack and are plonked into lovely apartments paid for by their companies. The other group is single people, as their employers can’t afford to fund housing costs for families, who were living five to a house in London and are happy to do so in Dubai in return for the fun of living here and the chance to move up the job ladder more quickly. Are the latter group financially better off for moving over, as I was when I came here? I doubt it. Still, come they do.

Talk of supply and demand is also distorted by what’s actually available. Whilst lots of units are coming on line, are they something that people can actually afford to rent or buy and are they something potential tenants actually want to live in? How many families really want to live in an apartment on the 55th floor? How many can afford to? Two or three bedroom apartments abound, but if I had children, I’d be far happier in a low rise such as ours, or in a villa. This seems to explain why many apartments appear to be empty whilst rental prices for villas have gone through the roof. Mr Aaron’s place is lovely, but Mr Aaron is too much bachelor. If you’re a couple with a young child, you might manage, but as kids get older or more children arrive, you’d want to be somewhere ‘normal’. Well, I would at least, but maybe I’m not the target customer.

Who are the target customers? Dubai recently hosted Cityscape, a huge property tradeshow. All the adverts are aimed at ‘living the luxury’ and ‘living the dream’. I find this kind of advertising leaves me completely cold. Talking about luxury is all very well, but is pointless if I can’t afford it. Whether I were buying a place to live in myself or 50 units to rent out, I’d be more interested in concepts such as ‘affordable living’, a track record of delivering on time, guaranteed low services fees, guaranteed parking and decent road access.

I have no idea how people can afford to buy where we live now. I have no idea how people are managing to rent here either. Prices have gone through the roof. Even if house prices fall by 10% in 2010, as predicted, that’s a minimal drop when compared to how much they’ve risen in recent times. The increase in value is all very well for us, but it doesn’t mean we can sell our place, cash our money in and rent somewhere for a few years – there’s no guarantee we’d find somewhere that wouldn’t eat up any profit we’d made, or that would charge a steady rent that would allow us to budget properly.

The government is taking some excellent steps to stop some of the crazier aspects of the property business here. There’s a new regulatory body and ‘flipping’ property is being clamped down on.

As with all things in Dubai, we’ll just have to wait and see how things pan out. It’ll be very interesting to see what things are like in five years’ time. I’m sure Mrs Saul’s judgement will stay spot on.

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One Response to “Dubai real estate”

  1. Riz Says:

    That’s the comforting thing about bubble troubles…get into these mkts at more rationale times and you can afford to take the ride back down to sanity, when it arrives… like having a seat reserved in a game of musical chairs.

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Dubai real estate

I have been consistently wrong about property in Dubai. Mrs Saul has been consistently right. Fortunately, as we are a team and she is team captain, we bought a property.

Owning our own property has insulated us from the problems lots of our friends have had, namely having to leave their villas or apartments, or being forced to accept huge increases in the rent they have to pay. On the flipside, lovely though our apartment is, we have had to deal with increases in service fees and frustrating quality issues. It is not only costing us far more to live here compared to our last place, it’s costing us far more than we had expected. When you’re promised 8Dhs per square foot in 2004 you budget accordingly and add some room for increases. When 2008 comes around and you’re made to pay 35Dhs per square foot, plus 10,000Dhs a year for a municipality tax noone told you about, your costs go up more than you had planned for.

Not that we’d be better off if we’d stayed where we were – all the parking has disappeared and three new towers have been built right next to our old building. What used to combine the advantages of living in a modern tower with a quiet neighbourhood and plenty of space has now become more crowded and, in my opinion, far less desirable a place to live. We’d be saving money, but would be cramped and miserable.

The articles mention problems with supply and demand in Dubai, yet there appear to be hundreds of empty apartments in most of the new developments. I can’t work out why this is – are they owned by investors, simply waiting to sell them on? Are they owned by people in neighbouring countries who need a bolthole should Sarah Palin decide to drop a moose on Iran?

I think part of the reason may be a general desire among landlords to leave a property empty rather than reduce the rental price. In London, I’d expect rents to go up and down, based on supply and demand. Most buy-to-let landlords have mortgages to pay, so have to accept a tenant at some point, even if the price isn’t as high as they’d like. I presume people who’ve paid for these apartments outright in cash simply have no pressure to get tenants in if they don’t like the price.

Another contributing factor seems to be the willingness of certain companies to pay whatever it costs to get top staff over here. That willingness generally raises prices. There seem to be two tiers of new arrivals from Europe at the moment. Top level blue chip types who get paid the full expat-whack and are plonked into lovely apartments paid for by their companies. The other group is single people, as their employers can’t afford to fund housing costs for families, who were living five to a house in London and are happy to do so in Dubai in return for the fun of living here and the chance to move up the job ladder more quickly. Are the latter group financially better off for moving over, as I was when I came here? I doubt it. Still, come they do.

Talk of supply and demand is also distorted by what’s actually available. Whilst lots of units are coming on line, are they something that people can actually afford to rent or buy and are they something potential tenants actually want to live in? How many families really want to live in an apartment on the 55th floor? How many can afford to? Two or three bedroom apartments abound, but if I had children, I’d be far happier in a low rise such as ours, or in a villa. This seems to explain why many apartments appear to be empty whilst rental prices for villas have gone through the roof. Mr Aaron’s place is lovely, but Mr Aaron is too much bachelor. If you’re a couple with a young child, you might manage, but as kids get older or more children arrive, you’d want to be somewhere ‘normal’. Well, I would at least, but maybe I’m not the target customer.

Who are the target customers? Dubai recently hosted Cityscape, a huge property tradeshow. All the adverts are aimed at ‘living the luxury’ and ‘living the dream’. I find this kind of advertising leaves me completely cold. Talking about luxury is all very well, but is pointless if I can’t afford it. Whether I were buying a place to live in myself or 50 units to rent out, I’d be more interested in concepts such as ‘affordable living’, a track record of delivering on time, guaranteed low services fees, guaranteed parking and decent road access.

I have no idea how people can afford to buy where we live now. I have no idea how people are managing to rent here either. Prices have gone through the roof. Even if house prices fall by 10% in 2010, as predicted, that’s a minimal drop when compared to how much they’ve risen in recent times. The increase in value is all very well for us, but it doesn’t mean we can sell our place, cash our money in and rent somewhere for a few years – there’s no guarantee we’d find somewhere that wouldn’t eat up any profit we’d made, or that would charge a steady rent that would allow us to budget properly.

The government is taking some excellent steps to stop some of the crazier aspects of the property business here. There’s a new regulatory body and ‘flipping’ property is being clamped down on.

As with all things in Dubai, we’ll just have to wait and see how things pan out. It’ll be very interesting to see what things are like in five years’ time. I’m sure Mrs Saul’s judgement will stay spot on.

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