Yet another law has been introduced in Dubai to protect the developers against defaults by small investors. Law Number 9 of 2009, announced recently by the Dubai Land Department and Real Estate Regulatory Agency (RERA), introduced a sliding scale to determine how much money a property buyer who defaults on payments will end up losing.
The credit crisis continues to spread far and wide, and Coface, the international export credit insurer says it is chasing at least €60 million owed to overseas suppliers by companies based in the UAE. Many developments were funded by deposits and part payments up front as the properties were sold off plan – but that market has all but dried up.
The global financial crisis has hit Dubai particularly hard and Dubai’s property bubble has burst in a big way. Banks and property companies are renegotiating or defaulting on contracts left and right. The lawsuits are already starting to fly according to Reuters news agency.
The amount of property for sale in Dubai is now having a strong effect of rental yields. Unable to sell, many owners are putting their property on the market as a rental unit instead. This is having a marked effect on rents. RERA (The Real Estate Regulatory Authority) published its new guidelines, showing a 50% fall in rents in certain areas of Dubai and Landmark’s report this month shows a further 30% fall in Palm Jumeirah and recommends even cheaper rents than RERA’s. This is good news for prospective tenants, and suggests we still have some way to go before Dubai’s property crash bottoms out.
A lot of changes are happening in the investment property world at the moment. The most alarming thing seems to be the introduction of yet more rules and regulations that will ultimately be applied only to the smaller investor and the increasingly apparent need of the governments to raise enough money to pay for bailing out the various industries and corporations deemed “too big to fail.”
According to Emirates Business, a law that would clarify the rules on issuing residency visas to property buyers in Dubai will be released within this year.
“We believe this has to be cleared. We raised it to the government and the government came back and said there is a law that will come very soon and we feel it has to come,” said Hamad Buamim, Director-General of DCCI.
Property prices around the world continue to decline as the financial crisis continues its way through the system. I don’t think anyone is under any illusions any more that we have not yet reached bottom. These are some headlines, although where bottom is is becoming more and more difficult to predict. With governments in disarray and it becoming clear that the banks have continued to disguise their true losses – even now. Available credit still presents a problem, and mortgage approvals are still extremely low.
Dubai house prices will fall by up to 70% from their peak levels, says Swiss investment bank UBS. Having said that, we have seen prices for property for sale in Dubai already down to these levels, so this may actually be an optimistic outlook. There is a good argument that Dubai’s luxury property market will never recover, given the underlying fundamental issues – Pollution, falling expatriate populations, lack of laws to protect small investors, and an almost total lack of transparency. Top this off with the liquidity crisis in the financial system, and you have a recipe for disaster.
Damac properties, the Dubai-based developer , has been caught up in yet another scam involving its real estate projects in Egypt after allegedly victimizing a number of investors in the Kingdom, Al-Madinah newspaper reported yesterday. Following on from news about Damac failing to pay fired employees due compensation, more than 170 Saudis and expatriates were recently discovered to have bought housing units in the company’s defaulting Hydepark project in the Egyptian capital Cairo.
A number of British contractors in the UAE have not been paid by the local developers – some are as much as six months in arrears and the British business secretary, Lord Mandelson has approached Dubai and Abu Dhabi’s rulers Sheikh Mohammed bin Rashid Al Maktoum of Dubai, and Sheikh Mohammed bin Zayed Al Nahyan, the crown prince of Abu Dhabi for assurances that the situtuation will be remedied.
More on UAE Property Developers Failing to pay British Contractors
