Off-plan speculators double their money in Abu Dhabi

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Flipping part-paid property bought off-the-plan from developers is a fast way to make a lot of money if you can find the opportunity with a trustworthy developer, and house prices are rising rapidly.

Investors put down a deposit of, for instance, 20 per cent on an apartment, preferably in a pre-launch purchase, and then re-sell for a higher price a short time later. But as investors have put down only that 20 per cent deposit, then a 20 per cent rise in the price of the unit means that you have doubled your money.

AME Info has talked to three lucky speculators in the past week who have achieved this in Abu Dhabi within the past month. One doubled his money in just nine days.

Market transparency

However, making money this easily is never quite as simple as it appears. All of the individuals we spoke to, who wished to remain anonymous, were working in positions that gave them knowledge about upcoming project launches that, while not privileged, is relatively hard to obtain.

On the other hand, this is surely true of any hot investment opportunity. Investors need to do their research and due diligence to sort out the wheat from the chaff, and the best opportunities are not likely to be advertised in the newspapers; you need to get out and find them.

It is a sure sign of just how quickly the Abu Dhabi property market has developed and how rapidly house prices are now rising that it is possible to successfully make large profits from flipping property.

Falling interest rates

In particular the recent slashing of US interest rates has put a new fire under the market. Real interest rates in the UAE are now strongly negative, a huge positive for any real estate market which has to discount the cost of money in valuing property.

This phenomenon may be relatively short lived. In Dubai the phase when good returns could be made from flipping property lasted not much more than a year, and in the end some speculators found that they could not re-sell and the market collapsed.

Given that speculators in Abu Dhabi can refer back to the very recent experience in neighbouring Dubai, it could be that this phenomenon is over more quickly, as the smart money will pile into the market fast and revalue real estate more rapidly.

Some people are very dismissive of speculators in markets but they do have a vital role in correcting price levels. But it has to be said that they do also often contribute to excessive prices through their over-enthusiasm. This is hard to counteract, although higher deposits on property is one corrective solution.

See also:
UAE stock crashes refocus investors into local property
Dubai property prices rise as other markets suffer
Ten reasons Dubai real estate will continue to boom