Property in Dubai
I gave far too many figures in my previous post, causing one comment that the post was 'confusing'.
Basically, people who live in ice and snow wanted warm villas for the winter. They poured money into Spain, which was like a firehose pouring into a plastic children's wading pool. They poured money into Greece, which was like a firehose pouring into a bucket. And they poured money into Dubai, which was a thimble that somehow had (or at least claimed to have) 20% of all the world's building cranes.
Rents soared.
Why rents soared in Dubai, other than my firehose-thimble analogy, isn't clear, but outrageous rents supported outrageous prices for freehold property (in the US, property prices were based on the fact that property prices never go down, so banks loaned ridiculous amounts of money to people who couldn't possibly make the loan payments, certain that the property would appreciate enough that the bank would make money when it foreclosed--the usual example being the well-publicised loan for more than $750,000 to a borrower earning less than $15,000 per year, a loan where the bank lost about $800,000 after legal fees when, after the crash, the house was really only worth about $75,000).
All the money came from the US bubble, with people selling worthless CDOs for outrageous prices and looking for somewhere, anywhere, to put the money, and some of it went to Dubai, where it overwhelmed a tiny market.
Then the US seized (actually a very small number of) Muslim bank accounts and other assets for imagined links to terror, and Muslim investors reacting by moving their money from the US to places like Dubai. So more money pouring into a thimble.
And then all the money created with the CDOs evaporated, and things crashed.
Everywhere. Including Dubai.
One comment was 'overbuilding.' But much more was sold than was built. Or even started. Emaar wanted a building to be more than 90% sold before it started construction. Of course, after the crash (and the end of property investor residence visas), many of those who'd put 5% down decided not to throw good money after bad. Or non-existent money after payments from a former salary, now terminated. So when I looked at the Burj Khalifa, I found hundreds of flats listed for sale in the local newspapers. Mostly with Abu Dhabi phone numbers for the sellers.
And I can see lots of towers planned, some of which actually got started before the crash, but very little work in progress, and little chance they'll be finished to flood the market with empty flats and villas.
Not that new towers are needed to flood the market with empty flats, my own building emptied as summer started, and no one seems to be looking.
Basically, people who live in ice and snow wanted warm villas for the winter. They poured money into Spain, which was like a firehose pouring into a plastic children's wading pool. They poured money into Greece, which was like a firehose pouring into a bucket. And they poured money into Dubai, which was a thimble that somehow had (or at least claimed to have) 20% of all the world's building cranes.
Rents soared.
Why rents soared in Dubai, other than my firehose-thimble analogy, isn't clear, but outrageous rents supported outrageous prices for freehold property (in the US, property prices were based on the fact that property prices never go down, so banks loaned ridiculous amounts of money to people who couldn't possibly make the loan payments, certain that the property would appreciate enough that the bank would make money when it foreclosed--the usual example being the well-publicised loan for more than $750,000 to a borrower earning less than $15,000 per year, a loan where the bank lost about $800,000 after legal fees when, after the crash, the house was really only worth about $75,000).
All the money came from the US bubble, with people selling worthless CDOs for outrageous prices and looking for somewhere, anywhere, to put the money, and some of it went to Dubai, where it overwhelmed a tiny market.
Then the US seized (actually a very small number of) Muslim bank accounts and other assets for imagined links to terror, and Muslim investors reacting by moving their money from the US to places like Dubai. So more money pouring into a thimble.
And then all the money created with the CDOs evaporated, and things crashed.
Everywhere. Including Dubai.
One comment was 'overbuilding.' But much more was sold than was built. Or even started. Emaar wanted a building to be more than 90% sold before it started construction. Of course, after the crash (and the end of property investor residence visas), many of those who'd put 5% down decided not to throw good money after bad. Or non-existent money after payments from a former salary, now terminated. So when I looked at the Burj Khalifa, I found hundreds of flats listed for sale in the local newspapers. Mostly with Abu Dhabi phone numbers for the sellers.
And I can see lots of towers planned, some of which actually got started before the crash, but very little work in progress, and little chance they'll be finished to flood the market with empty flats and villas.
Not that new towers are needed to flood the market with empty flats, my own building emptied as summer started, and no one seems to be looking.
posted by Dubai@Random at 3:18 am
4 Comments:
I suggest it is not a good idea to patronise the commenters on your blog by implying that we get confused by too many numbers. Frankly, what was confusing about your last post was how you had wandered from previously offering insightful observations of life in Dubai to the wanton accretion of random information, unsupported assertions and implausible claims to compose an utterly specious argument.
Dubai World (THE primary commercial arm of Dubai) borrowed a load of money that no properly run (or democratically accountable) entity would ever have taken on. Furthermore, it did this with no contingency to deal with any setback and no operational control to ensure adequate returns on all those borrowed funds (all those empty palatial gilded marble offices are not much use now...). Just because you CAN borrow money does not mean that you SHOULD. You better have a very robust plan to ensure repayment that accounts for various different scenarios. Especially when you come from a culture where debt is a criminal matter.
You've also massively oversimplified the issue with sources of the development money: Russian, Iranian, Indian and Pakistani investors were not dependent on US "CDOs". But they certainly know how to withdraw their money when a market tanks. The credit crunch was just the prick that burst the bubble. There were an awful lot of pricks inflating it for several years, alas not all of them got what they should have had coming.
And again, you have completely ignored the evaporation of investor confidence due to the many cases of outright fraud protected by (in some instances committed by) those in power along with the opaque and arbitrary legal framework.
Dubai is the deserving victim of its own hubris and in much worse condition than anyone is acknowledging. The government hasn't paid most of its bills for two years. Why do you think all the road and transport projects have stalled or, at best, are creeping along??? It is going to get much, much worse before any chance of getting better.
Another fascination is the eighth marvel of the world which is the Palm Jumeirah. This is a man made island which is fit as a fiddle of a palm tree which shows its inventiveness. It contains an extensive variety of extravagance manors, inns and lofts, for example, the eminent Atlantis - The Palm. This resort gloats of the water park Aqua Venture which has the 61 meter long vertical waterslide. apartment for sale dubai marina
Why rents took off in Dubai, other than my firehose-thimble similarity, isn't clear, however absurd rents bolstered over the top costs for freehold property. dubai property sales
"فيلا للبيع دبي
فلل للبيع في دبي بالتقسيط
فلل للبيع في دبي"
Post a Comment
<< Home