Dubai Property Prices Fall Massively – But Colliers International says “just a little”

Colliers International have just released their “Dubai Q4 House Price Index for Dubai. According to the HPI, “the house prices in the emirate dropped by an average of 8% between October 2008 and December 2008.  Despite this drop in prices the index indicates a year-on-year price growth of 59% between Q4 2007 and Q4 2008.” The index shows that the overall average price level is back down to Q2 2008 levels. Colliers says the index “will help investors benchmark investment values over a period of time.”

He comes to a screeching halt!

What? Are you pulling my leg? That is it? Property prices in Dubai only fell 8% and you can now benchmark investment values based on this report. Seriously – this information is so at odds with the prices  that I am seeing it is not even funny.

Read the report and slowly you will begin to come to the realization that there are a few crucial pieces of information missing from this report that completely makes it a waste of time. Sales volumes for one. Although the report states clearly that there was a “45% drop in transaction volume in Q4 2008 compared to Q3 2008″ it carefully neglects to mention the drop in Q3 from Q2, and the fact that in Q4, basically  – Nothing got sold !

Casa Dubai closed their doors this month with the following statement:

Public Notice – Attention Casa Dubai clients

Casa Dubai has been an extremely successful and profitable business.

The World Economic Crisis has unfortunately had a serious effect on the Dubai Real Estate market and consequently a terminal effect on Casa Dubai.

Casa Dubai has been forced by the current economic situation to commence proceedings for compulsory liquidation. All our offices are now closed and our staff have been laid off.

Casa Dubai generated sales of £21m in the eight months to August and virtually nothing since.

The specific reasons for closing the business are:

• Developers delaying or being unable to pay commissions due on sales.
• A major developer fleeing from the police with over £500,000’s worth of Casa Dubai’s clients’ money.
• The inability of Casa Dubai to sell properties in which it had invested money generated from its own profits and consequently losing all invested.
• The lack of income in the months September to December to pay for overheads.
• The collapse of sterling making foreign investment considerably more expensive than just a few weeks ago.
• The liquidity problems of UK and World banks which no longer have a desire to lend money to buy property.

The majority of our clients will not be affected by these events, for those that are, I sincerely apologise for the distress caused.

All our clients will be able to talk directly to the developers, please refer to your contract or sales agreement for the contact details.

Most developers will face difficulties in completing their projects for a variety of reasons due to the current crisis.  It is our belief however, that the majority will still deliver their developments, albeit with delays.

Once finished, our clients’ investments will show exceptional returns.  Dubai will recover and will become a highly desirable destination.

We would like to thank our clients for using our services, we ask our clients to appreciate how the sudden world events could not be predicted or planned for.  We have become another insignificant statistic, just like many thousands of other businesses will become in the coming months. Casa Dubai website

Now, that doesn’t sound like an attractive investment destination to me. Despite Casa Dubai keeping the door open with their suggestion that Dubai will recover. In the meantime if you are an investor beginning to suspect that your off-plan dream condo is not going to get built, I suggest you get ready for a big disappointment. Most of the investors in off-plan properties that have been canceled are having a little trouble getting their deposits back. If you invested through Casa Dubai, the reciever’s address in on the website. But don’t hold you breath – I doubt they have much clout with the Dubai government.

The other crucial piece of information to consider is that this report from Colliers only covers 14 developments and it only takes information from selected banks that have provided a mortgage on a property in one of these developments. It does not take into consideration sales of distressed properties, cash sales, or repossessions. Nothing was sold in Dubai Q4 and very few mortgages were written either.

In other words, this document is completely worthless, other than to satisfy a few worried investors that their property may have devalued and I once again marvel at the duplicity of the financial institutions. Colliers International have just made it plain and clear – They are not to be trusted. They are not “Consultants,” they are salesmen.

Don’t just take my word for it. Property select stated in November that prices had fallen in Dubai by half.

The PDF is available to be downloaded here