March 05, 2008
Understatement - Dubai, unproven rental market potential
An amusing read in FT Money which besides making a questionable assertion regarding the Moroccan property market (at least as far as I can tell) amusingly states:
Another area to be wary of is Dubai. There has been a huge amount of development in Dubai, but rental demand is unproven. "Projects have been unbelievably ambitious and rental returns very seductive," says John.
Hundreds of thousands of luxury apartments are due to come on to the market in Dubai next year and developers are promising yields of 9-10 per cent. Sales agencies have also launched some very eye-catching deals to entice investors.
One agent, Damac Properties, is offering a free Bentley or BMW with each Dubai apartment purchase, as well as the chance to win a private jet or island, although the company was unable to provide details of the offer.
John says the question is what happens when the building stops: "They have built so many luxury places, but how many people will choose to holiday there?"
Free BMW for a purchase.... So very Dubai (including the non transparency on the actual validity of the offer.
Posted by The Lounsbury at March 5, 2008 08:26 PM
Filed Under: Biz - Private in MENA
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Snort. From the very brief time I spent in Dubai, I got the impression that the real estate market was all about people selling yet-to-be-built mirages and banking on other people to be willing to fork out large amounts for them, getting financing from similar optimists, hoping buyers buy the hype and see properties as an investment, et. Everyone's banking on the promised demand, and hoping the buzz about hot properties will boost their value. It all sounds like a lot of hot air. Do people really want to pay huge amounts for a flat in a glassy skyscraper in the middle of a hot concrete jungle with construction going on everywhere? Does anyone really believe the ads showing people sitting at sidewalk cafes, living the Western dream? With prices as they are why would anyone prefer Dubai to, say, Morocco, or Spain, or Italy?
Posted by: SP at March 5, 2008 10:23 PM
I'd take issue with the wording of that article. Even with the large numbers of wealth individuals moving to Dubai, the author is correct to draw attention to the glut in the luxury segment of the market. And buyers do need to be careful about transparency, especially given that even contracts aren't necessarily as binding as one might think. But I think the mainstream rental market is going to have great returns for a while to come, at least in the absence of a US-Iranian war. It's just the high-end vacationers who are unproven, something which isn't made sufficiently clear here. That having been said, property laws prevent foreigners from buying (or subleasing) homes in most of the city, and the most expensive homes are the most likely to be available to them.
The article is in a section of FT that is specifically focused on that kind of property, not middle markets. Ergo the comment about Morocco in there as well.
Posted by: The Lounsbury at March 7, 2008 11:55 AM