This would seem to suggest that the local property market remains unaffected by the global financial downturn, although conversely anecdotal evidence from this year's property showpiece Cityscape Dubai suggests lower attendances and investor interest than previous years.
Indeed, the show saw the launch of only a handful of major new developments although some, including Nakheel's kilometre-high tower, trump existing projects.
In addition, dredging work on one of the group's flagship developments, the Palm Deira, is rumoured to have been put on hold, although the company denies this.
Lack of liquidity
Certainties are that regional banks have suffered from scares relating to lack of liquidity. As with elsewhere, this has been handled by governmental guarantees and influxes of liquidity.
Hikes in the interbank lending rates are already being felt by end users in Dubai. Some mortgages have seen repayment increases of around 20% per month, further restricting already tight budgets. Mortgage providers have also lowered the percentage of the value of the unit that they are willing to lend investors.
The emirate's recent property laws are therefore being enforced at a time that the market most needs it, although confusion remains, especially regarding the legislative provisions around the laws regarding financing and repayments.
Currently, if an investor defaults on payments for an offplan property, they have 30 days to pay, after which the developer can cancel the contract and must return the monies paid, with a deduction of no more than 30%. Should property prices start to fall and unfinished units lose their lustre, some investors searching for liquidity could decide that it is more beneficial to them to default than carry on making payments.
'At this point in time the implications of Law 13 are not well publicized understood by the general public,' says Heather Wipperman Amiji, CEO of real estate investment consultancy Investment Boutique. 'If people come to understand that they may be able to reduce losses by defaulting and recovering 70% of monies paid, it may encourage more defaults.'
Distorted market perceptions
A further situation that may have impacted private buyers' return on investments, and therefore affected perceptions of the market's long term stability, is the current emirate-wide rent cap: 'According to the current regulations owners have to sell tenanted properties with the tenant in situ, which means that, in the current rising rental market, the net yields for new owners will fall making the upside potential greater on empty units.
'This has created a distorted spectrum of return. A lot of products that are actually ready are being kept off the market because the landlords don't want to be tied into this sort of deal, which in turn pushes rents up because it creates a shortage in the market.'
Despite this, Amiji does not believe that it is wise to paint the market with a single brush when discussing future opportunities: 'There are so many types of real estate that it is a mistake to generalise on how the city will handle the current global crisis as a whole. We're still seeing a lot of multinationals moving here.
'These organisations need to house staff, find offices, use hospitals and all the rest, and they need to do it today. Off-plan product, particularly in the ultra luxury sector is not moving. In the coming months we expect to see a number of new projects put on hold or scaled back while the market tried to understand the local impact of the global crisis.'
It is also important to note that what may happen to select developments in Dubai are unlikely to affect the entire region as all the markets have very different underlying fundamentals.
Although Dubai has seen the sharp price increases being fuelled primarily by speculators Amiji asserts that, in the broader MENA region, it is a matter of making an informed choice rather than rushing blindly in: 'It is a matter of knowing which projects are supported by real demand, sound planning and strong developers. Through careful analysis and sound negotiations, astute investors will be able to realize some great opportunities.'
Dubai property agents consider impact of legal changes
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