PREDICTIONS AND DUBAI REAL ESTATE

A Friend recently emailed the below questions. My reply is at the bottom. (All names have been changed). 

Hey There, 

Somebody related to me is interested to buy some rentable property (probably 1 or 2 apartments) in Dubai.

I thought it best to throw this question out to the forum & ask if:

a) The prices have bottomed out

b) They are expected to rise significantly in the coming 6-24 months

Regards,

Hassan (name changed)

My Answer is Below

Well Hassan, it really depends on who you ask…here is my take on the above questions depending on who you pose the question to:

a) The prices have bottomed out

The Agent Answer: Yes they have. Buy now. You should already know this. 

Your neighbor’s answer: They haven’t bottomed out yet. They never will. I’ll most likely never know, I’ll buy on the upside, when all the others in the neighborhood are buying and I’ll regret buying anyways, because I generally follow the herd. 

The quasi-wise more apt answer: No one and no one’s father will ever know if the market has truly bottomed. You can only accurately call it after the uptick following the bottoming out. Instead of trying to find the bottom buy value. Value stays, price fluctuates (especially in real estate). So don’t worry if you buy value. To buy value you should be looking at several factors, macro ones, such as is the city/country competitive, has a vision, good leadership, stability and security,…etc and on a micro-level, should location, quality, demand an supply, population growth…and also very importantly the price you pay for the asset today. 

There will generally be three prices of a property – the high price, the average price and the lowest price that someone has recently bought the property for. After you’ve identified a good property, your role (or your Agent’s) will be to get slightly better (if possible) than the lowest price someone else has recently paid for a similar property. 

Ertu’s answer (a mutually known acquaintance): I bought silver and it didn’t do me any good. 

Azam’s answer: I have two apartments in Dubai Marina and I’ll offer you 10% rental income, buy direct, don’t pay any commission. I am easy to negotiate with. 

The hedge fund guru: According to the technical analysis, yes you can call the bottoming out quite accurately and here is a white paper on it…

b) They are expected to rise significantly in the coming 6-24 months

The Agent Answer: Yes Sir. Right Sir. Approximately 30% to 50%. You know about this boom from 2003 – 2007 well the same is happening Sir…. 

Your neighbor’s answer: Dubai is done. Will never rise again. I am immigrating to the west… and shall/may return to Dubai or the east, after I get my passport (he just doesn’t know that yet). 

The quasi-wise more apt answer: Dubai may never see the same kind of incremental rise it did before. Those price increases are signs of young markets, and as markets gain more transparency and maturity price increases and rental incomes start mimicking other slightly more mature and transparent markets. Hence no more volatile crazy increases.

Furthermore there is plenty of supply coming in, which regardless of where demand stays (or increases) shall subdue or keep prices generally at bad. Remember the law of supply and demand (its a law, not a theory). 

All the above said and done, Dubai/UAE has just recently kicked off the EXPO 2020 campaign. Its gonna get bigger and they’ll roll it out to the world extra. Can Global Village on a truly Global Scale, effect property prices – maybe. It could. The extension to the metro will complete,…maybe those communities in those areas may hold some hidden value that can be unlocked. The problem with those communities in Dubai South (closer to EXPO 2020) is several developers selling off-plan are asking for prices that have the expectant price rise built in, thus leaving you open to more risk than benefiting from the actual up tick. 

Ertu’s answer (a mutually known acquaintance):  I speculated on Silver. And thats it. I ain’t speculating again. I did call the 2013/2014 correction in real estate correctly, google the DXB Archives if you don’t believe me.  

Azam’s answer: I also have an apartment in Dubai Sports City, which is 10 minutes distance from EXPO 2020, if you Air BNB it you can get returns of 10%, and that is that. Buy Direct. No commission.  

The hedge fund guru: Can’t be bothered with you lot. 

Now, as for how to end with a bang? Well, that's another blog post for another time.

Fahd Dawood 

CEO | FD Global Properties

+971 55 421 8943

Author: “The Intelligent Real Estate Investor”

YouTube: Fahd Dawood