Woes... From the Atlantic Coast

What’s gone wrong? Getting answers here is a tough business. Dubai does not do “problems”: it does snow-covered ski resorts in the desert and razzle-dazzle seven-star hotels. Through boundless optimism and vast oil wealth, it has created a climate-controlled zone of opportunity for expatriate property investors. Or, at least, it thought it had.

The Sunday Times of Great Britain offers a critical assessment of problems in the Dubai property market in its 22 January publication.

Some of the discussion is familiar--serious problems with Jumeirah Islands' luxury villas, contention over management fees at Emaar's Dubai Marina properties, delays on projects (namely Nakheel's and Damac's), and absence of the promised new property legislation.

It is the kind of discussion that some will view with alarm. Take the complaint of Laurie McWhan:

Three years after I made my investment, I don’t have my house, a year’s potential rent of £12,000 is down the drain, and all they have offered me is a few thousand pounds in compensation. It’s scandalous.

The British, McWhan's bought an off-plan flat in Damac's the Waves for £127,000.

Further along in the article, in defence of the developer, Nakheel's executive chairman speaks of teething troubles and growing pains.

There is merit in both arguments. Should an investor take all the promises of the developer at face value? A hard sell is a hard sell. The seller is going to make his pitch, but the buyer should be able to read between the lines. For an off-plan development, 2 years might become 3--the force majeure clause is in the contract. The sales pitch might read, "8% guaranteed rental income for the first 3 years." Sounds great--it's a sales pitch! There's still the little matter of force majeure.

So, whether a scandal or teething troubles, there has probably been a fair amount of investor naivete--or greed--coupled with developer exageration--and deceit. Buyers should be more probing, selective and in the end practical about their expectations, and developers should simply be more honest.


Photo taken 21-Jan-2006 by AltinD, posted at Skyscrapercity.com.
Towers rising toward completion at the NE end of Dubai Marina.

The "slow" pace of construction and problems with delays are perhaps relative issues. The five towers pictrued above are each being built by different private developers. Although master-planned by Emaar with certain guidelines, most towers and projects in the Dubai Marina are being built independently by small, medium-size and large private developers. It is perhaps unfair to single out two or three to characterize all the development going on. That being said, significant delays are being reported in the JLT (Jumeirah Lake Towers) development due to issues arising with master-developer Nakheel. (See dubaipropertyforum.com reference below.)

Another noteworthy aspect of the Sunday Times article is the bit of real news it offers on some of the hot property issues. It is news in the sense that it offers insight and comments that have yet to appear in the local press. (The Sunday Times obviously has some clout.) For example:

• Residents of Jumeirah Islands villas "have written an open letter of complaint to Dubai’s new ruler, Sheikh Mohammed bin Rashid al-Maktoum" over the various issues plaguing the development.
  
• Residents of Emaar's Dubai Marina Phase 1, "embroiled in Dubai’s first service-charge strike," have refused to pay the full amount of management fees demanded by Emaar.
  
• A quote from Nakheel Executive Chairman and member of Dubai's ruling Executive Council, Sultan Ahmed bin Sulayem, on property legislaiton:
  
  

  The law is being drafted. It has been presented to us in the executive council and I expect it to go very soon... within the next three months. The law is going to happen.

Finally, to gain an insightful glimpse of the complex relationship between developers, master developers and customers, a very thoughtfully crafted letter from one developer to its customers to explain reasons for delays and other issues is worth careful reading. The letter (posted 22 January) along with commentary is located at dubaipropertyforum.com. There are often defendable reasons for delays and other problems, but a conciliatory attitude and forthright reckoning on the part of the developer as demonstrated here is often lacking.

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