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Hi all,

I have a few questions regarding buying real estate in Dubai:

1. Is now a good time to buy? I've been reading mixed reviews lately. Will I be getting a good ROI in say 5 years time?

2. Do any banks offer mortgages with 0% deposit rate?

3. If I do indeed decide to buy, and say the apartment will be ready in 2010, do I have to make the loan payments from now to the bank or do they begin after I move in?

4. Which areas do you believe are most affordable for a 1 bed with the best value in the long-run?

Thanks for your all responses in advance.

bridge wrote:Hi all,

I have a few questions regarding buying real estate in Dubai:

1. Is now a good time to buy? I've been reading mixed reviews lately. Will I be getting a good ROI in say 5 years time?

2. Do any banks offer mortgages with 0% deposit rate?

3. If I do indeed decide to buy, and say the apartment will be ready in 2010, do I have to make the loan payments from now to the bank or do they begin after I move in?

4. Which areas do you believe are most affordable for a 1 bed with the best value in the long-run?

Thanks for your all responses in advance.

Arnie is your man on this question. I happen to know he is selling a bijou desres at this moment. One careful owner, low mileage, FSH, AC, tinted windows, slight crash damage from where he threw the workmans angle grinder in the pool!



Knight

Answers to your questions-

1) Don't know.

2) Not that I know off. If anything, with the credit crisis, mortgage companies are now reducing their LTV rates.

3) If you choose Islamic finance, then no you do not make any payments until completion. Upon, which you receive a bill for the back-dated interest.

4) Don't know.

bridge wrote:Hi all,

I have a few questions regarding buying real estate in Dubai:

1. Is now a good time to buy? I've been reading mixed reviews lately. Will I be getting a good ROI in say 5 years time?

2. Do any banks offer mortgages with 0% deposit rate?

3. If I do indeed decide to buy, and say the apartment will be ready in 2010, do I have to make the loan payments from now to the bank or do they begin after I move in?

4. Which areas do you believe are most affordable for a 1 bed with the best value in the long-run?

Thanks for your all responses in advance.

1. No, i would wait for prices to drop more. and who knows what the returns would be by 2010
2. No, usually between 65% and 90%
3. If you buy off plan you will have a payment plan from the developer, if you get a mortgage you will pay mortgage for the stage payments they make on your behalf
4. I would forget about Dubai and buy in one of the other emirates instead.

to be honest, i think its a bit risky now. Rule number one in my book is if you haven't been here to see for yourself do not under any circumstances buy anything. Come to Dubai, do your homework, choose a good property that you feel is worth the price. These days prices are sky high and there are tons of empty apartments. The situation can only last so long. If you buy in a good area you may be ok but if you buy the wrong place at the wrong price you will likely lose your ass.

mortgages depend on what you buy. If you buy offplan direct from the developer, you will pay about 5-10% initially and installments after that. This is where flippers make money as you can pay 5% down, sell the next day at a 1% premium and make 20% ROI. That is getting much harder to do these days though.

You can get an islamic mortgage where you wont make any payments until it is completed

Best value = anywhere by the ocean. All the rest are a little risky in my opinion, but dont take my word for it, do your homework. I always like to think in terms of blue and green, blue being water, green being golf course or garden. If it has these ingredients chances are it will hold value. Dubai marina would be my first choice if I were buying a completed apartment.

I would have to agree with DK that arnie is the guy to talk to but chances are he'll say run for the hills.

yep - run for the hills as Max said.

I have just sold mine for a ridiculous amount of money to some stupid idiot who thinks it will be a good investment.

The bottom line is dont touch anything even with a barge pole and that means completed or off plan.

The UAE Gov't only last week announced they will guarantee all investors fund in both the Islamic and Brits banks etc. The banks over there are running scared and like others have said the days of 0% or even 10% LTV are gone.

Dubai property owners who have bought in the last 18 months will soon discover what "negative equity means", the UAE banks are scared s.h.i.t.less because they stand to loose huge amounts because of their reckless lending in a market that was on the up, just like the US and UK.

The market is now on the down - hold on to your hats for a rough ride, wait a year then grab yourself a bargin and i promise you there will be plenty.

Thanks arnie and everyone for your frank responses.

I think at this point I will wait it out for at least a year. Hopefully by then I will find something worth investing into.

It is also dependant on your work situation. I have just started a five year project (construction) here. Now at the moment the going rent for a two bed property is around 180k (Springs - Villa, Marina Apartment) and rising. Over 5 years that will be nearly 1M.

For me investing in an apartment around the Marina must be a sound investment. For sure it is not the optimum time to buy, but I wasn't living here three years ago.

So the situation is not black and white and a "run for the hills" does not apply to all.

Scratcher wrote:It is also dependant on your work situation. I have just started a five year project (construction) here. Now at the moment the going rent for a two bed property is around 180k (Springs - Villa, Marina Apartment) and rising. Over 5 years that will be nearly 1M.

For me investing in an apartment around the Marina must be a sound investment. For sure it is not the optimum time to buy, but I wasn't living here three years ago.

So the situation is not black and white and a "run for the hills" does not apply to all.

incorrect

you are assuming rental will increase - it wont

in established property markets property prices reflect rental prices

Why do people believe dubai is any different - it isn't.

Also with a market readjustment downwards that Dubai is experiencing for the first time in its history, the drop in value on a villa or appartment would easilly equate to the amount of rental over the same period.

For example with as little as a 25% downturn in price on a 3million Dhm 2 bed appt in the Manina area, will equate to a loss of 750,000 Dhs over say 5 years.

Say the rental started at 200k per year and reduce this over the same period you end up being even.

Dont forget in this calculation assuming you sale the appartment at the end thus paying 3% agents fee's, the final loss would be 817,000 dhs.

25% is actually a realistic figure over the next 3 years in Dubai and not 5, therefore it is actually cheaper to rent than buy.

sold mine in the Lagoons a few months ago then bought another one in Ajman. will try to hold this one at least for a year to see if it makes me some cash.

Regarding your questions, Bridge!

1. Yes you can expect good ROI in next 5 years, at least better than many other major real estate markets.

2.Not sure about that, but it's highly unlikely.

3.Yes, in most case.

4.I'd recommend you go for Ajman ( very near to Dubai with a thriving real estate market).

That's all frm my side. Thanks

arniegang wrote:
The market is now on the down - hold on to your hats for a rough ride, wait a year then grab yourself a bargin and i promise you there will be plenty.

Arnie, how much do you expect the market on completed (and off-plan) apartments to drop next year?

If you have a 5 year horizon and will not need to liquidate the investment till then, I'd say go ahead and buy.

onetickin wrote:

arniegang wrote:
The market is now on the down - hold on to your hats for a rough ride, wait a year then grab yourself a bargin and i promise you there will be plenty.

Arnie, how much do you expect the market on completed (and off-plan) apartments to drop next year?

$64000 question mate - the only certainty is down. If i had bought off plan in the last 12/18months i would be crapping myself right now.

arniegang wrote:
For example with as little as a 25% downturn in price on a 3million Dhm 2 bed appt in the Manina area, will equate to a loss of 750,000 Dhs over say 5 years.

Say the rental started at 200k per year and reduce this over the same period you end up being even.

Dont forget in this calculation assuming you sale the appartment at the end thus paying 3% agents fee's, the final loss would be 817,000 dhs.

25% is actually a realistic figure over the next 3 years in Dubai and not 5, therefore it is actually cheaper to rent than buy.

I was tempted to rerun your calculation and correct me if I'm wrong:

Buying an apt at the current time: AED 3M
renting it for 5 years: 200K*5=AED 1M
selling after 5 years assuming 28% equity loss (agency fees included): AED 2.16M
Total earning: AED 3.16M

Assuming a fixed rental over 5 yrs. I don't see a loss unless the renting drops. And it's not likely to happen at least for the next couple of years.

Totally agree about buying shitting myself if brought off-plan recently.

bedro, arnie assumes a reduction in the rent over a 5 year period.

I move out in November with work and am renting for the first year to see how the market lies. Probably going to see a market slump for a while so I am hoping that rental prices will drop also.

Global credit crunch means less people moving, means more property available and bargains. But need to hold out a bit longer, this crunch is here to stay a while yet.

bedro wrote:

arniegang wrote:
For example with as little as a 25% downturn in price on a 3million Dhm 2 bed appt in the Manina area, will equate to a loss of 750,000 Dhs over say 5 years.

Say the rental started at 200k per year and reduce this over the same period you end up being even.

Dont forget in this calculation assuming you sale the appartment at the end thus paying 3% agents fee's, the final loss would be 817,000 dhs.

25% is actually a realistic figure over the next 3 years in Dubai and not 5, therefore it is actually cheaper to rent than buy.

I was tempted to rerun your calculation and correct me if I'm wrong:

Buying an apt at the current time: AED 3M
renting it for 5 years: 200K*5=AED 1M
selling after 5 years assuming 28% equity loss (agency fees included): AED 2.16M
Total earning: AED 3.16M

Assuming a fixed rental over 5 yrs. I don't see a loss unless the renting drops. And it's not likely to happen at least for the next couple of years.

I did say you would end up being "even" the loss would be a straight loss no rental. I was looking at it more from a shall i buy or rent and we both agree it is better to rent it seems.

However if you bought the appt with a mortgage as an investment then you will make an overall loss over 5 years

people need to also remember that over the next 5 years the demand/supply ratio will change in favour to over supply, this compounds the losses in sales and the bigger reductions in rent.

and things will get worse probably quicker than you think.

From today the Emirates Bank and Dubai Bank have suspended all secondary market/resales Mortgages

Hold onto your hats

Intersting, I was thinking about three years. Anyway regardless, with the stock market slump worsening regardless of bail outs, construction will slow, it always does.

It could go either way, but my money is on a reduction in house prices and rental values.

arniegang wrote:people need to also remember that over the next 5 years the demand/supply ratio will change in favour to over supply, this compounds the losses in sales and the bigger reductions in rent.

Just out of curiosity, how much do you think the property market in Dubai will fall? 10%? 30%? Or 50%? We are talking about the next 1 to 2 years, right? And how about prime locations like Palm Jumeirah, DIFC and Burj Downtown?

If I recall correctly, Dubai's population is 1.44 million and is growing at a rate of about 110,000/year. In order to accomodate this growth (of foreigners), about 45,000 apartments have to be completed every year. However, the delays in projects over the past few years have made the situation worse. Hence, more than 45,000 apartment have to be completed to catch up with demand over the next few years. Assuming 70,000 apartments are required just to meet demand in 3 years' time and to stabilise rental; that would be equivalent to completing 3 to 4 developments the size of Jumeirah Lake Towers every year. I suspect the construction pace here is too slow and that supply would still lag demand in the near future. The fact that investors and landlords own 2 or more apartments does not help the supply shortage situation as well.

Gene wrote:

arniegang wrote:people need to also remember that over the next 5 years the demand/supply ratio will change in favour to over supply, this compounds the losses in sales and the bigger reductions in rent.

Just out of curiosity, how much do you think the property market in Dubai will fall? 10%? 30%? Or 50%? We are talking about the next 1 to 2 years, right? And how about prime locations like Palm Jumeirah, DIFC and Burj Downtown?

If I recall correctly, Dubai's population is 1.44 million and is growing at a rate of about 110,000/year. In order to accomodate this growth (of foreigners), about 45,000 apartments have to be completed every year. However, the delays in projects over the past few years have made the situation worse. Hence, more than 45,000 apartment have to be completed to catch up with demand over the next few years. Assuming 70,000 apartments are required just to meet demand in 3 years' time and to stabilise rental; that would be equivalent to completing 3 to 4 developments the size of Jumeirah Lake Towers every year. I suspect the construction pace here is too slow and that supply would still lag demand in the near future. The fact that investors and landlords own 2 or more apartments does not help the supply shortage situation as well.

Kinda depends if that number of people really come here. Last I heard, there were more leaving than arriving due to the spiralling cost of living here.



Knight

Gene wrote:

arniegang wrote:people need to also remember that over the next 5 years the demand/supply ratio will change in favour to over supply, this compounds the losses in sales and the bigger reductions in rent.

Just out of curiosity, how much do you think the property market in Dubai will fall? 10%? 30%? Or 50%? We are talking about the next 1 to 2 years, right? And how about prime locations like Palm Jumeirah, DIFC and Burj Downtown?

If I recall correctly, Dubai's population is 1.44 million and is growing at a rate of about 110,000/year. In order to accomodate this growth (of foreigners), about 45,000 apartments have to be completed every year. However, the delays in projects over the past few years have made the situation worse. Hence, more than 45,000 apartment have to be completed to catch up with demand over the next few years. Assuming 70,000 apartments are required just to meet demand in 3 years' time and to stabilise rental; that would be equivalent to completing 3 to 4 developments the size of Jumeirah Lake Towers every year. I suspect the construction pace here is too slow and that supply would still lag demand in the near future. The fact that investors and landlords own 2 or more apartments does not help the supply shortage situation as well.

DK is correct. However be careful when you look at the figures. Take the figure of 110,000.

So, take away the one's that leave during this time, then look at the ratio of Expats that earn considerably good money against the poor immigrants from india and the phillipines that come into the country to live in labour camps.

Although i dont have the figures to hand, i would bet £100 the number of property completions far exceed the number of expats that would be in a position to buy or rent.

I do know that 76,000 completions are expected in 2009, and 56,000 in 2008.

As regards drop in value, who knows its anybody's guess but it will be dictated by demand. My personal opinion is that the market is currently over inflated by 25% at this moment.

These are official figures from the Ministry and it records the actual population growth in Dubai as well as UAE over the years. I don't see any reason for distortion or intent to mislead. In fact, I am not surprised with the figures as they co-relate somewhat to the ever increasing number of cars seen on the road these days and the insufficient amount of parking lots everywhere you go.

All praise should go to RTA who has managed to widen and improve highways like SZR; Al Khail Rd; etc. to accommodate the car population with remarkable success. It's truly amazing how Dubai could keep car and fuel prices so low with minimal taxes (like the Salik and car registration fees) to allow almost everyone to own a car on average and keep traffic tolerable. It has definitely improved slightly over the years if you noticed. Imagine when the metro is completed next year, things would be much better.

So my point is this: I trust the Dubai government has the political will to complete all the projects at Cityscape. They are very pro-business and will do everything they can to rectify a problem and attract investments.

There will always be oddballs everywhere in the world who will complain even when they are in heaven but I reckon this would not deter the goal and forward momentum of Dubai as there is no turning back.

Geographically, Dubai is also very well-positioned and it is convenient to visit any part of the world here. The weather is fantastic for about 8 months in a year which is much better than places like UK where it rains all the time plus winter months are miserable.

I think you've been drinking the water

maximusprime wrote:I think you've been drinking the water

Excuse me but why are you here? Where do you get your water from? What's your complaint?

Im just saying you sound like you sit inside all day and read Dubai tourism brochures.

"I don't see any reason for distortion or intent to mislead"
How about the fact that it keeps the foreign investment bucks rolling in as long as people think their apartment will be worth something is a few years.

"all praises should go to RTA .... accomodate the traffic with remarkeable success"?? are you serious? have you driven in this city?

the question isnt whether the projects at cityscape will be completed, it is whether they will be worth anything when they are finished. If they cant fill them with people, they wont be worth anything.

I agree - you must be drinking the water. 29 Years in Dubai, and I can surely qualify to make some comments on what you've said.

Gene wrote:All praise should go to RTA who has managed to widen and improve highways like SZR; Al Khail Rd; etc. to accommodate the car population with remarkable success.

Define "remarkable success" man. Do you live on the Palm, work in Tecom and never go further than MoE or Ibn Batuta?

Gene wrote:It's truly amazing how Dubai could keep car and fuel prices so low with minimal taxes (like the Salik and car registration fees) to allow almost everyone to own a car on average and keep traffic tolerable.

Minimal Taxes? Have you seen what the ridiculously high visa fees are now? Lemme guess, you don't require a visit visa in advance for your visitors...

Gene wrote:Geographically, Dubai is also very well-positioned and it is convenient to visit any part of the world here. The weather is fantastic for about 8 months in a year

Fantastic weather? Ok - wait for next month's May - Sep period, and then sit out for sheesha or dinner, al fresco. Not many people can call >40C as fantastic.

Gene wrote:These are official figures from the Ministry and it records the actual population growth in Dubai as well as UAE over the years. I don't see any reason for distortion or intent to mislead. In fact, I am not surprised with the figures as they co-relate somewhat to the ever increasing number of cars seen on the road these days and the insufficient amount of parking lots everywhere you go.

All praise should go to RTA who has managed to widen and improve highways like SZR; Al Khail Rd; etc. to accommodate the car population with remarkable success. It's truly amazing how Dubai could keep car and fuel prices so low with minimal taxes (like the Salik and car registration fees) to allow almost everyone to own a car on average and keep traffic tolerable. It has definitely improved slightly over the years if you noticed. Imagine when the metro is completed next year, things would be much better.

So my point is this: I trust the Dubai government has the political will to complete all the projects at Cityscape. They are very pro-business and will do everything they can to rectify a problem and attract investments.

There will always be oddballs everywhere in the world who will complain even when they are in heaven but I reckon this would not deter the goal and forward momentum of Dubai as there is no turning back.

Geographically, Dubai is also very well-positioned and it is convenient to visit any part of the world here. The weather is fantastic for about 8 months in a year which is much better than places like UK where it rains all the time plus winter months are miserable.

I didn't say do not trust the figures. My implication was meant to show that your figure of 110,000 which i am sure is correct, is open to scrutiny and examination.

But............ i know for a fact that there are no figures published by the Gov't as too how many leave per year and ....like i said the published incoming figures do not breakdown what portion of those 110,000 are low grade unskilled workers like labourers/cleaners or maids that could not afford to buy a garbage can let alone buy or rent a property.

In conclusion, do not let the headline figure of 110,000 fool you into thinking that there are 110,000 millionaires coming into Dubai annually.

Only a fool would believe the government will step in and insist on developments being completed if both they and the developers know there is not a market for them.

Currently they are far too pre-occupied to pumping money into their own banking system like in the UK and US. Even this week Shiek Mo has pumped 70 Billion Dhs into the UAE banking system. You will find this did not make front page news because nothing bad ever happen in Dubai !