has called the Dubai Property phenomenon a 'long tail,' though this isn't the usual use of the term.
Yesterday, I took a friend who wants to buy some property (or at least a residence visa) to Dubai Properties and Emaar.
A salesperson had told him that there are developments that give a residence visa within a week of placing a small deposit on a property, and he was thinking of investing.
Our enquiries at both Dubai Properties and Emaar indicated that it is not possible to get a residence visa so quickly in Dubai: the property must be completed, and the owner must have taken possession. (It is not clear if there are residence visa deals in other Emirates that provide immediate visas after a small down payment, or if the salesman was promising more than he could actually deliver.)
In Dubai, the earliest one can get a visa through Emaar or Dubai Properties is at least 5 months after signing a contract to buy a property.
Not long ago, Emaar was advertising 'only 5% down.' When we asked, Emaar said that is subject to many conditions. Actually, if all conditions are met, it's 'only 4% down.' But the Emaar saleslady said it might be difficult to meet all conditions, which are set by local lenders, not by Emaar.
When Emaar first started, they demanded 30% down, and 70% upon completion. Now they demand 80% down and 20% upon completion. (The 80% is actually spread over a period of a few months, but is due well before promised completion, which is usually long before actual completion.)
In spite of this, when we asked, Emaar said almost every development was sold out, though they had a few flats available with poor views in the less desirable developments, but even these would all be gone in just a few more days.
Over the last two months, Emaar has raised prices for the developments near the Burj Dubai from about €200 per square foot to around €300 per square foot, saying that there is very strong demand for the properties in those developments.
The 50% increase seems at odds with the secondary market, where prices are dropping since the imposition of strict rent controls.
When we went by Dubai Properties, they said they had lots of flats available, priced the same per square foot as Emaar. They did not show any of their developments as 'SOLD OUT' the way Emaar did. And, when we asked about a tower, they said they had flats available on every floor. And there are a lot of floors.
So investors are wondering, 'Is this the top of the Dubai Property Bubble?'
My friend told me that he went to invest with Emaar a year ago, but a fellow countryman confided that, as many properties were going to come on line in 2006, prices were certain to fall quite a bit, so he decided to wait. Only prices didn't fall. Emaar and Dubai Properties developments rose by more than 50% during 2006, as did properties on the secondary market before the rent control announcement of December 2006.
But, after such a rise, are we finally at the top of the bubble?
The DFM certainly seems to be discounting the value of the developers.
If almost all of Emaar developments are already sold out, it looks like there is still a lot of upward pressure.
But Emaar has been know to declare a development 'SOLD OUT' when there were many units still unsold, as part of their marketing strategy.
In which case, the 'upward pressure' is a manufactured marketing ploy.
And the early 2006 promise of an immediate drop in Dubai Properties may finally be approaching a year late.