Home Buyer... erm, Home Owner Dubai 2006

2006 ushers in the 5th year of the Dubai property market since it was inaugurated by then Dubai Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum in May 2002. Motivate Events has rung in the year with its 4th annual property show Home Owner Dubai, held at the attractive Madinat Jumeirah on 26-28 January. Predictably the event showcased new and existing off-plan properties located in a variety of development zones across the city. What was glaringly absent from this year's event, however, was anything else.

It was billed as a homeowner's event to feature seminars and exhibits on a variety of topics, with titles including The Digital Home, Investors Forum, Landscape and Interior Design, Home Security and Tools and Machinery. I cannot say, however, that I found anything of significance on these topics as I wandered around the arena floor or perused the Official Catalogue and Seminar Guide. On inquiring about the schedule for seminars I was informed that the seminars had been cancelled due to the recent passing away of Dubai's ruler, HH Sheikh Maktoom Bin Rashed Al Maktoom. But that leads me to wonder, is conducting a seminar any more inappropriate under such circumstances than holding a sales exhibition, which is what the remainder of the show amounted to.

To place credit where credit is due, the exhibitors were in excellent form, having attractive, informative displays and sales reps prepared to answer visitor questions. Admission was free even for those who had not pre-registered as called for on the official website. Better Homes and MAG PDD were two among several organizations with large and welcoming display areas. Like the stunning architecture and grounds of the Madinat Jumeirah, the program was very tatefully presented. In addition to developers and property sales agents there was significant representation of mortgage lenders as well. This, however, points again to what was wrong with the home owner event--it was clearly a home buyer's event.

I was, in fact, a bit confused upon entering the arena foyer where visitors were being asked to fill in a questionaire. Most of the questions were of the nature of what type of property are you intending or looking to buy? I had to tick nearly every box "no," and was left wondering why there was no place for me to express my interest as a new home owner.

Spending about two hours in the hall I eventually had to visit some of the booths pretending to be interested in buying property--otherwise what else was there for me to do there? I spent an additional hour enjoying the wonderful grounds and taking photos around the Madinat Jumeirah. I would hope that next year's event will more closely live up to the billing. Any visitors who left similarly disappointed or confused may wish to express this directly to the organizer at homeownerdubai@motivate.ae.

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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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Dubai Marina Coffee Time

Date:  Friday, 27 January 2006
Time: 11:30 a.m. - 12:30 p.m.
Place: Coffee Bean & Tea Leaf, Marina Walk

This will be a casual meet-up for anybody interested, to drop on in. The topic? Dubai Marina, of course.

Who's buying what? What's your favourite tower? Is JBR going to be too crowded? Is it a good time to invest?

This will be the first casual get-together for Dubai Marina fans.

Show up anytime within the hour posted above. Have a cup of coffee or light snack. I'll wear a bright yellow baseball cap to easily stand out. Ask for Bruce--the enthusiastic author of this and other Marina webpages. See you, soon!

Illustration from rareandwelldone.com. Go to DM Blog latest posts, Dubai Marina Communities or MAG 218 Community homepage.

Payment Options A-Plenty

It is getting easier and easier to buy property in Dubai. It's probably a reflection of the growing competition for sales with all the towers coming up--particularly in the Dubai Marina. I'm sure some agencies are sticking to their high-priced, inflexible schemes, namely the big guys--Emaar, Nakheel, Dubai Holdings, etc. But some of the smaller players are coming up with new schemes that seem to benefit equally the buyer and the seller.

MAG PDD the MAG 218 developer will negotiate a payment plan with the buyer. Dubai Select, sales agent for the Torch, has it's own 15-year payment plan which effectively cuts out the banks and all the hassles with trying to secure a mortgage. On the face of it, it seems you simply make the initial downpayment, sign the agreement and you've got what amounts to a low interest--much lower than the banks--mortgage plan.

With such a plan there's no need to prove your finances and gather all kinds of documents. It makes so much sense to cut out the banks. The sales agent makes an easy sale and if the buyer defaults they simply reposses. My guess is the legal situation in the UAE will make it easier for them to reposses than for the buyer to fight it. (And how is this any different from the risk of facing repossesion on default with a bank loan?)

On the other hand the reduced hassle and lower interest rate benefits the thoughtful buyer. The burden on the buyer is to be responsible and careful for his own sake, to minimize the risk of default. This is preferable, however, to having to jump through hoops to prove your worthiness to banks--and what would you get for all your troubles, anyway? You would get the chance to fork over a lot of additional cash, well above the actual value of the loan. The stringent requirements to prove one's finances is totally for the benefit of the bank and is of little or no value to the buyer. So, why not cut them out? The option to do so is thankfully emerging.

I'm sure there are or will be other sales agents and developers offering similar schemes. A new development being promoted in an inland development, Dubai Lagoon located in Dubai Investments Park, offers a 7-year payment plan with 50% paid in the first two years at which time the buyer may take possession of the property and pay the remaining balance in monthly installments over a 7-year period, and there are absolutely no interest charges! Unit prices are as low as Dhs 250,000 for a studio apartment and Dhs 600,000 for a 2-bedroom unit. It is clear that opportunities are really starting to open up for buyers in Dubai's property market.

  Dubai Lagoon in Dubai Investments Park--in Jebel Ali off Emirates Road.

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Coffee Time?

There's always something new to discover on the web. By chance today I happened upon the site Meetup.com, which lets people set up groups where those who share a common interest can meet up locally. It's rather different from the common online forums where people usually only "meet" in cyberspace. They claim to have 1.8 million people signed up worldwide and over 1100 in Dubai.

I thought to set up a group for those interested in the Dubai Marina--property buyers, residents, developers, boating or skyscraper fans, etc. As it turned out there's a monthly fee for setting up any group. With so many free services on the web I couldn't see why they required a fee. Other than the chance to publicize the group, I also couldn't see what service they would be providing. The idea, nonetheless, is great. So, I thought why not inaugurate a Dubai Marina Coffee Time club here.

This idea is hot off the presses, so details are yet to be worked out. I welcome suggestions for a venue and time. One of the shops listed in Dubai Marina Info's Shopping & Dining would probably suffice. I'm open to suggestions. In any event, stay tuned for further details.

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Should I Buy a Flat in Dubai Marina?~The Year 2006 Answer

AME Info addresses this question. One important consideration,

...at the end of the day, a decision to buy a property is a personal thing, and the answer on whether to buy is always a matter of considering your individual circumstances.

The gist of the matter, according to the article, is that the market is not what it used to be. Pre-2005, property values were quickly rising, meaning substantial profit could be gained in re-sales. In 2005 off-plan property prices began to flatten, meaning substantially lower profits to be had via re-sale. In 2006-07 large numbers of units, especially mid to high-priced apartments, are expected to hit the market, meaning re-sales and profits of any kind will be difficult. Furthermore, premiums in rental returns will be much less than they have been up to now--for the same reasons.

The final word, "Don't buy?" No, tihs would not be a reasonable conclusion to reach for most. If one is looking for a home there is still a lot of value in the market. For those willing to view property as a long-term investment as well, values will eventually rise to perhaps double what they are now. For speculators, however, or those looking for quick profits, the glory days are over.

Hot tip for property buyers:

It used to be a laborious chore at best to locate that ideal property. There was no central clearing house that one could go to to compare what was available. At best one might scour newspaper and magazine ads and piece together a rough selection of what was out there and follow this up with calls and visits to numerous agencies. Today, there are at least 2 publicatons which come as close to being a one-stop shop as one could hope for,

• Better Homes Property Listings (Dhs 5)
• Project Company's Property Finder's Guide (Dhs 10)

These are two invaluable resources. Even those not looking to buy but simply curious about the market will find these interesting reads.

The Better Homes guide has even put together a rating, district-by-district, of the lowest, highest and average unit price available, as well as the same data on a dhs/sq. ft. basis.

The Property Finder's Guide accompanies each of its listings with not only the usual renders of what the development may eventually look like, but recent photos revealing current construction status and interior views of completed units.

Both guides use color coded maps to divide the city into sections identifying each of the numerous developements by name. These guides will almost make propery buying fun!

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Can This Offer Be Refused?

Should I say, "Shucks, I already went for something else," "Great, how do I sign up," or "Next offer, please?"

Damac has on offer a free Jaguar with every flat or office purchase in its off-plan towers. Gimmicky, yes, but is there any merit. Perhaps. Last time I checked, Damac's off-plan offerings cost considerably more than those of similar size and locaton. Of course, the developer can claim other benefits--more facilities, better materials, better designs and layouts, etc. But there are similar properties with similar facilities, and design and layout features are often a matter of taste. In any event, these features probably don't justify the higher prices.

So, few should doubt that they will be paying for the "free" car if they go for the offer. Yet, there still may be some merit. I suppose the car is handed over as soon as the contract is signed and the first two payments are made. In most off-plan purchases this would mean 20% of the total purchase price. If one had to take out a mortgage to fund puchase of a flat then it might be hard to take out a car loan at the same time, if they needed one. This two-in-one offer from Damac would solve that problem.

But, I don't see any additional merit in this offer. One could probably find a similar off-plan option for less--saving enough to purchase the car of their choice if indeed they needed or wanted one. If the Damac property is really one's choice, why not try instead to negotiate a lower purchase price?

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Holiday Rentals in Dubai Marina

This is a call to Dubai Marina property owners who plan to offer their apartment or villa purchases for holiday rental. I would like to set up a post in Dubai Marina Info for Dubai Marina Holiday Rentals.

This would present a simple listing of holiday rentals made available by individual property owners as opposed to what is available in hotels. Such a listing would include basic info like,

• property name
• unit type
• price per day/week/month
• link for additional details
• short descriptive statement

This would allow viewers to make a quick comparison of offerings before deciding which links to pursue.

Contributors should not worry about how comprehensive such a listing would be (or not be at first). The list should gradually expand. At present Internet searches for holiday accommodation tend to bring up countless registries that handle worldwide listings. This makes it hard for people to locate more individual offerings as might become common in the Dubai Marina.

Contact me or post your details at the Comments link below. Please include the info as listed above.

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We Ain't Seen Nothin' Yet

The scale of development in Dubai constantly amazes me. It is one of the things that turned me into a property buyer and now a property enthusiast. I'm not in the business of real estate at all. I've just decided to purchase a small flat that I can call home. Like everyone I was somewhat skeptical in the beginning. But when I started to see these projects actually materializing in the desert, my skepticism faded. One of the many amazing things in this whole Dubai real estate boom is that, according to some, the grandiose projects announced within the past few years are only the beginning.

One such prophet of greater things to come is the Middle East Economic Digest's Edmund O'Sullivan, who marvels,

What has been built is only a fraction of what is yet to come... If I am right, then it remains true that Dubai is witnessing the greatest project story ever told. (MEED, 16-Dec-05)

Mr. O'Sullivan's enthusiasm seems unbridled. It was his reaction to what "speaker after speaker unveiled" at the 6-7 December Major New Product Opportunities Conference in Dubai , sponsored by MEED. I will quote more of his comments further down which elaborate on the scope of development underway.

That sort of enthusiasm is contagious. That afterall is what bubbles are often made of--as many would describe Dubai's current building boom. But as a resident in this country who has seen these events unfold over the past 5 years, I would argue that there are fundamentals in this market that underlie the high emotions. For starters, as anyone on the outside will readily point out, there is oil money--not so much that originates within Dubai as that which is available for investment from neighboring Abu Dhabi emirate and surrounding Gulf states. This, however, is only a small part of the equation. Tourism is another factor that brings in not only money but also creates international awareness of what is going on. This along with trade are two industries which are already well-established pillars upon which Dubai is able to support its building boom.

Furthermore, above and beyond these factors are quite simply the vision, will and authority of the leadership in Dubai emirate to carry out its daring plans and schemes. Few places have such a combination of factors as these. It isn't simply a case of rampant speculation that is driving the boom, in fact, speculative activity in the real estate market has already begun to wane.

Now, the whole point of this piece is to second the viewpoint that MEED's O'Sullivan deftly argues in his own article. It matters little what I think, but the words of the editor of a leading Middle East business publication do count for something. I close with Mr. Sullivan's way of saying, "You ain't seen nothin' yet!"

Emaar Properties is pressing ahead with its $20 billion Downtown project, including the world's tallest tower and largest mall. City of Arabia, just a small part of Dubailand which aims to attract up to 100 million visitors a year, will have a mall, a monorail and computerized, life-like dinosaurs. Dubai Sports City's four world-class stadiums should be good enough to hold Olympic events. Its homes will accommodate up to 70,000 permanent residents.

Emaar's Downtown with Burj Dubai (world's tallest building)

Business Bay, being developed by Dubai Properties, entails 500 towers and a canal up to 130 meters wide that will run south from the head of Dubai Creek and eventually to cut through to the Gulf. When complete, it will effectively turn Bur Dubai into an island.

Dubai Property's Business Bay

If this is not enough, then the new Jebel Ali International Airport will have six runways, enough space for 120 million passengers a year and a targeted, long-term population of 750,000 people...

Jebel Ali International Airport & Jebel Ali City

And then there is Nakheel, the biggest developer of them all. Palm Jumeirah, which is due to open in phases from the end of 2006, is designed to have a permanent population of 100.000 people. Palm Deira, which involves history's largest ever dredging contract, is to have at least 250,000. Dubai Waterfront and Palm Jebel Ali outstrip them all, with a final projected combined population of more than 1 million.

Nakheel's Dubai Waterfront with Jebel Ali Palm

Addendum

And what connection has all of this with the Dubai Marina. Well, the Dubai Marina, envisioned by Emaar, was the very first of the mega projects, conceived of in the mid-1990's with construction of the Marina canal starting in 1998. Expected to consist of up to 200 towers to house more than 100,000 people, it is presently the largest construction site in the UAE. Even at such a scale the Dubai Marina has almost become passe--especially having been upstaged by competitor Nakheel's massive Dubai Waterfront project. Looking beyond the Dubai Marina, enthusiasts chart out the ever more grandiose projects yet to break ground.

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If Buildings Could Speak

One of the first things as a kid that I thought I wanted to become was an architect. My fascination began with the monuments of ancient civilizations. Those old movies depicting ancient Rome, Greece and Egypt captured my imagination. Modern architecture interested me as well. When I was 7 years old I went on a family trip from my native Louisiana to the US capital in Washington D.C. That was in 1968. One of the most memorable moments was riding on an expressway through Richmond, Virginia. The image stored in my memory is that of riding between a canyon of skyscrapers, like those on Sheikh Zayed Road. Although I've never since passed through Richmond Virginia, I rather doubt that it ever was anything like SZR--but through a child's eyes it was nothing less than spectacular.

Years have passed and I never did take up architecture. I became a teacher instead. It was from another early interest I had, in seeing different people and different places. I find myself in the UAE now and the interest in architecture is once again rekindled. This time by all the amazing projects under development in Dubai. Part of my self-appointed mission is to do a feature on each tower of the Dubai Marina. A monumental task one might say given the almost countless number of towers being constructed there. But there are things to fascinate at every turn.

I have thus far covered 9 projects, the Dubai Marina Phase 1--Emaar's intial Dubai Marina project--the MAG 218, which is of particular interst to me as a buyer of a unit there, Marina Heights, the Torch, Marina Pinnacle and other towers in that vicinity. As I prowl the internet for info and images and then set out to compose a review, I start to find that there is a lot more to each tower or project than raw stats. Of course, the height of the tower, the dimensions of its flats and the like are things I want to know about. But delving further I find each one has a unique character and a story of some kind to tell.

One is that of Le Rêve. The building itself is so inauspicious that I hardly gave it a second glance. What I came to discover, however, is that it represents the pinnacle of luxury. Having been designed by the same architects who created the Burj Al Arab, this tower is all about distinction and privalege.

Then there are the Princess and 23 Marina towers. Each is vying for title as the tallest residential tower in the world. One is staking its claim at 100 floors and the other at 90. But with construction of both towers only just getting udnerway it is certain that one or the other will spring something new in order to surpass the other.

23 Marina, in fact, shouldn't even have to rely on its claim as tallest residential tower to gain distinction. It will have other amazing features like a 6-storey lobby and small swimming pools on the balconies of its 48 duplex apartments.

Finally, there is the Marina Crown. The story it has to tell is more like a televison drama. It starts with the anouncement of yet another exclusive tower for the Dubai Marina. It plays out with beautiful images of a tower whose podium is clad with columns and classical trimming--like a rich colonial hotel. The tower is crowned, of course, with a tall, dinstinctive green roof. But as the story unfolds, the building's on-site billboard display is abruptly removed. After two months what emerges is a tower re-designed with its crown clipped. "How can the Marina Crown be stripped of its crown!" I and many others wonder. Something tells me this story has a few more twists and turns ahead.

Now, when I look at the towers rising at the Marina, I realize there is much more to see than a facade or concrete frame. I know now that each one has a unique story to tell. Each has its own special features and qualities.

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Restaurants & Bars (Reviews Anyone?)

There are currently 39 restaurants and bars listed at the Dubai Marina Info site's Shopping & Dining page. Entries vary from name only to contact details, website listings and menu samples. Short personal reviews contributed by website visitors would make a useful addition to the page.

Visit the Shopping & Dining link, and post your reviews in comments there or at this page's comments link. Your comments will be posted to a Reviews page and linked to the restaurant's or bar's listing. Currently listed restaurants and bars include those at Marina Walk, the Grosvenor Hotel and the Habtoor Grand. Establishments in the other Dubai Marina area hotel establishments will be added later, however reveiws of establishments from these hotels, if any, are also welcome.

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Top Real Estate Story, 2005:Dubai Announces Property Law--NOT

The long-awaited property law in Dubai, allowing expatriates and foreign investors to obtain legal title to freehold property, was finally passed in the waning hours of 2005...

This is the news that didn't happen in 2005, despite numerous reports and rumors that such a law would be passed, which would finaly clear-up any uncertainty about property ownership in Dubai--a matter that worries investors and potential investors alike. The following is typical of reports that did surface through the year:

The latest feedback from senior lawyers is that they expect a Dubai property law to be issued later this year, in advance of a federal law. This follows the promulgation of a separate property law by Abu Dhabi last month. (AME Info: Thursday, September 08 - 2005)

The waiting game starts anew in 2006.

But how much does it really matter that such a law gets passed anyway? Conventional wisdom is that it will bring more clarity to the market which will be needed to entice more investors. But the reality is that there is significant if not sufficient investor interest and participation already. More, of course, can't hurt, but it really isn't needed.

The long awaited decree has, in fact, already been issued, as of May 2002. This is what kicked off the property rally in the first place.

It was in May 2002 that the Dubai Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum issued a decree allowing foreigners to buy property freehold. (AME Info, A Short History of Dubai Property, p3--12 Aug 2004) ...After Sheikh Maktoum's decree, this sparked the real estate boom in Dubai's residential property. (UAE TEN's History of Freehold).

May 2006 will mark the 4th year since that momentous event. Since then the amount of development and investment that has taken place has been unprecedented with foreign and expatriate investment accounting for a large part of it. Investment in freehold property is the defacto reality.

From this perspective, investors already have the legal assurance they need in the form of the 2002 decree from the Crown Prince Ruler of Dubai. Greater authority rests in the federal powers held by Abu Dhabi, but it is apparent that they have not only refrained from counteracting the Crown Prince's edict, but are by some measures attempting to institute a system of foreign or expat ownership in Abu Dhabi, modelled after Dubai's.

What is not clear and in need of formal governmental proceedures is a system for registering titles. This is, of course, imperative from a legal standpoint but it is more a matter of proceedure than rights. As it stands, it is quite clear that foreigners and expats have a right to purchase and own property in Dubai. The only thing that could change that is not a policy or legal clarification, but an out-right reversal of policy. There is no reason for anyone to expect that to happen.

In the final analysis, the right to freehold ownership of property in Dubai is already in place, and has been since May 2002.

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Postscript (20-Jan-2006):

Interestingly, the following was found online:

The new UAE law on freehold property is expected later this year, a top Dubai Government official revealed last week.

This is from an AME INfo article dated 28-Feb-2004! 8 months passed through the end of 2004 with no such law passed, the same through 2005, so why should 2006 be any different?

Final Postscript (15-Mar-2006):

Reports are in that the new property law has been enacted.