With property prices falling, jobs being lost and tightening credit conditions, Dubai is facing negative equity and repossessions for the first time. There are estimates that as many as 40% of the mortgages in Dubai are already in default.
Latest news from Dubai is confusing to say the least. At the one end of the scale, the Dubai government is canceling 1,500 work permits and visas a day as the slowdown continues and developers shed staff, at the other end of the scale, developers keep on putting our press releases claiming that it is business as usual.
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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.”
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It never rains but it pours. Not a metaphor one would usually use regarding Dubai. but things do seem to be going from bad to worse. We have been calling the Dubai bubble for some time now, but it is still rather shocking just how fast things have fallen to pieces.
With property values tanking in Dubai, Nakheel have now gone to the trouble of suggesting that David and Victoria Beckham “have shown interest in increasing their property portfolio in the UAE.”
If you were beginning to believe the press releases stating that Dubai is immune from the financial crisis, the latest report from Gulf news should disabuse you of that notion. Employees fired by Damac last month due to the financial crisis are not being paid their full settlement. According to former employees of Damac Properties, the management calculated their three-month notice amount on their basic salaries, in contravention of the law.
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As Dubai’s property market crashes, more and more issues are being raised about the quality of existing developments, with owners finding broken promises by developers causing more than just financial hardships. The latest complaints are regarding Emaar’s treatment of investors and unresolved maintenance. Homeowners of serviced apartments in The Address in Downtown Burj Dubai say they have complained about nearly 100 problems but none have been dealt with yet.
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Standard & Poor’s Rating Services said today that it had revised its outlook on Dubai-based property developer Emaar Properties PJSC (Emaar) to negative from stable.
“The outlook revision reflects a rapid weakening of the real estate markets in Dubai, and our uncertainties about the depth of the downturn and the pace of eventual recovery. A prolonged downturn could negatively impact our view of Emaar’s business risk, and it could also lead to deterioration in Emaar’s currently healthy financial position,” said Standard & Poor’s credit analyst Alf Stenqvist.
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Citigroup Incorporated has arranged more than $8 billion (Dh29.3 billion) finance for various Dubai government entities in recent months, the global banking group said.
“This is in line with our commitment to the UAE market in general, and reflects our positive outlook on Dubai in particular,” said Citi’s chairman, Sir Win Bischoff in a statement.
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Dr Murtaza Mughal, President of Pakistan’s Economy Watch said on Saturday that a host of Pakistani businessmen have lost billions of dollars of investments in speculator-oriented Dubai real estate property downturn.
