26 November, 2008

Property forums buzz

Dubai dominates property forums for the wrong reasons:
The Dubai property market is hot right now, but not because it is booming. It is exercising a great deal of space in the property forums this week for all the wrong reasons. It is going downhill fast. One particularly worrying aspect is the number of developers who are now admitting publicly that they do not have the finance to continue. The banks won't lend anymore to developers or buyers.
...
A second thread on the same forum gives the full text of a letter sent by London and Dubai-based property wealth manager MiNC, developer of Prodigy 1 in Jumeirah Village South to investors asking for extra payments for apartments to enable it to carry on with the project after two banks withdrew funding.

The letter states that if investors don't pay up then the project will stop. Despite rules to protect investors it would appear that if the investors don't agree to pay more for apartments they have already bought they could be regarded as cancelling their contract and the developer could be entitled to 30% of what has been paid so far.
Does that capture the mood?

24 comments:

Anonymous said...

Does that capture the mood?

yeah it does let me get my camera plz

A Blessing in Tragedy said...

The banks won't lend anymore to developers or buyers

This is somewhat inaccurate.

Banks (at least the large national ones) are still lending to buyers. the CRITERIA that said lenders must meet has gone up. There are now higher standards.

Which I, as a banker, have been calling for... for about 3 years now.

Example, No more nothing or 10% down schemes. At my bank I will not even look at an application unless the buyer can foot 25% of the cost.

Also, income levels. I was expected to write loans for people earning 5k a month. I am not allowed to recommend a loan for anyone earning less than 20k.

Same for developers. National banks are (kind of) obligated to fund large national PJSC. We have stopped however, funding smaller, or non-govt backed developers (example, if DAMAC came by wanting a loan, Id have to say no) even though DAMAC is a huge company. Their employees are also not eligible for any facilities. even credit cards.

Now if the person who stated banks arent lending earns 16K, then yeah, to him, we dont lend anymore. But that statement is 100% incorrect.

Keefieboy said...

ABIT - I'm sure DAMAC would be thrilled to read what you wrote here!

Anonymous said...

@ a bit

Its precisely the 10% schemes and loans for 5K a month that created the boom in the first place. And created the record growth! So its a "sour grape" to blame it.

A thought.. why give loan at all? Why not sell only the really rich who can put down the cash? I mean if you cannot afford it why buy it with borrowed cash!

-FR

Anonymous said...

@ Anon -FR,
Why loan at all ? OK I'll bite, because then you wouldn't have seen a fraction of the sales or follow up development that came after, but I'm sure that was a rhetorical question. I feel for the lifestyle buyers looking for a summer home, but anyone else who lost money on this pyramid scheme deserves it, if nothing else this crash weeds out the not so bright speculators. Dubai will return to being a suburb of Abu Dhabi (literally, considering the state of housing there) for the forseeable future. If the people at the top are smart this would be the perfect time to put indefinitely put the brakes on BS iconic development and concentrate on furthering productive industry, aerospace to begin with. Sewage treatment wouldn't hurt either...

The last time I visited I remember talking to a sanitation engineer about some swedish company that was laying a monstrously powerful undergound pneumatic garbage collection system that was sucking away all the waste from luxury building connected on the system. Reading about the latest problems with waste treatment, I have to say it's a damn shame that people who have the vision and resources to invest in these types of innovative solutions dont have the capacity to look at the long term big picture.

hemlock said...

ABIT: im certain i can guess where you work =P

as for damac employees not getting any facilities, i believe there was a circular out in one of the local banks to refuse loans for all associated with the real estate / construction industry.

--------------

on an altogether diff note, isnt this policy of the banks (local and foreign) totally against Shk Mo's vision of "build it and they will come"
(even if the govt puts pressure on the banks to fund real estate projects, banks will not be able to, cuz the liquidity has dried up).

if you stop building, dont complete what you've started and tell people it's doomsday scenario in dubai - that's just bad bad bad press... i wonder if the govt is reevaluating the "20mln people by 2020" plan.

bwana_daoudi said...

And the sad thing is, there are embedded ads about...Dubai property.

a former popular blogger said...

Am I the only one who sees the good in this situation? Sure UAE is not in recession but we are definately in its wake ...which is the best place for us to be. The slow down will take the edge of the excessive boom and rising costs of everything and gradually bring costs down. So no more handing out loans to dirt poor folk (sorry thats you if you earn 5k or less a month) and middle income folks (7k - 20k) will have to be spend less coz the banks wont give.

Even those of us who earn 25K+ will have to rethink taking out loans and shopping for crap we dont need and so the markets will correct inshallah...and after the world crunch is done...hopefully prices for everything will be reasonable again...

Khalas..i'm gonna blog it. Too much to write here.

Jassim.

Dubai Entrepreneur said...

A lot of us have been waiting and wanting this crash to happen. Some of us are even caught in the middle of it. Most of those who wished for the crash didn't really appreciate how wide the net is. Well, it's here.

ABIT, Damac are crooks and a bank lending them money is a highly questionable one. Rumor has it, Sijwani vanished (but that's probably just rumor).

We all know the deal. The government owns most things that are worth noting. The government also has no interest in saving anyone other than its own organizations. It's this half-sleeve free market economy in Dubai that is creating situations ripe for a crash.

Banks modified their 'criteria'? Puhlllease. The UAE doesn't seem to understand moderation. Either you have ridiculous politics for borrowing money or you are giving away money to people who have no business borrowing.

I am glad I don't need a bank loan or facility for anything, but I can understand the frustration of those who do.

For the record, I like the idea of Dubai just being a suburb of Abu Dhabi :)

i*maginate said...

"ABIT: im certain i can guess where you work =P"


...me too:) LOOL! A-B-I-T :P

All the cash in the world and 8 years to complete the building.

You guys didn't even have a website before...classic...the only entity in the world that doesn't need to advertise!

;-)


---there is a thread on expatwoman.com about the crisis - it's on the Dubai Forum. Very interesting discussion there.

Anonymous said...

Is it just me or are things going just a little pear shaped?

A Blessing in Tragedy said...

ABIT: im certain i can guess where you work =P

as for damac employees not getting any facilities, i believe there was a circular out in one of the local banks to refuse loans for all associated with the real estate / construction industry.

I work at NBAD. Yes, it was actually circulated in the papers that because of the "current economic climate" facilities were to cease immediately to companies and employees in the real estate, brokerage, and investments companies.

Banks modified their 'criteria'? Puhlllease. The UAE doesn't seem to understand moderation. Either you have ridiculous politics for borrowing money or you are giving away money to people who have no business borrowing.

Exactly why these correction are way over due. I dont think stopping the 200k loans for an infinity to a guy who makes 10k a year is a bad thing.

For the record, I like the idea of Dubai just being a suburb of Abu Dhabi

With the amoount of money Abu Dhabi spends on the rest of the country, I sometimes wonder if we should just secede the union. lol.

I am glad I don't need a bank loan or facility for anything, but I can understand the frustration of those who do.

At some point you will. Everyone does. buying a home, starting a business. Maybe you fall into the category of people who make a very good living. if so... move your salary to me, free everything! lol.

i*maginate said...

Was just wondering, because you keep mentioning them and suddenly I got an anon comment on my blog from that entity. And they keep visiting! I thought places like that would not encourage BLOG surfing during work hours? Then again, they did visit once on a Friday. Must be a special visit from the treasury :) Hey if you are reading this I can provide you with my bank details lol

Editor said...

It's just a matter of time for the situation to easy. In fact, we are already on the way to recovery (since few days), in case some one missed the newly established large government-backed lenders Emirates Development Bank and Abu Dhabi Finance.
Dubai is not immune to the global financial turmoil and the reaction of the market is natural. But confidence was partially restored last week when Dubai Holding repaid billions in loans and DFM rallied by the end of the week.

As for the real estate prices, these are sliding down with the speed they are picking up. So, don't be surprised if in the next 2 to 4 quarters prices reach higher than the last summer. The real estate stocks improved at the the end of the last week by 8-10%.

Good Luck every one and don't give in to bad publicity!

Keefieboy said...
This comment has been removed by the author.
Keefieboy said...

And keep the blinkers on! Editor, what exactly is different about Dubai/UAE that makes them immune from this crisis?

Editor said...

Keefieboy,

the only priority of Dubai in comparison to many other big cities around the world, is that is part of the UAE. And UAE is one of the 5 largest producers of oil all over the world. I don't consider and explanations about free zones etc.

Check this out:http://www.forbes.com/forbes/2004/0315/092.html

The priority of UAE as a country, is that has young (37 years old) very flexible economy and it's government body is proactive and capable to introduce changes in a matter of hours, such as issuing decrees or pouring money in the banking system.

Leave the oil revenues and the declining oil prices, the huge profits from the past 40 years were reinvested in international projects and developments of the infrastructure.
For example, in Abu Dhabi are located the largest worldwide investment fund. I know as a matter of fact that ADIA (Abu Dhabi Investment Authority) is investing at least 60% of the portfolio in non-oil projects.
T

Keefieboy said...

Ed: don't let me upset your dreams.

Editor said...

"The future belongs to those who believe in the beauty of their dreams." ER

Anonymous said...

ADIA has 100% of their investments in non-oil projects;

And govt decrees arent always enough .

Before the recent problems., a real estate agent told me not to worry as the govt will set minimum prices for every property and that will cause property prices to increase. Suffices to say there is a difference between optimism and blind stupidity designed to fool dumb investors.

A Blessing in Tragedy said...

Actually, I dont have internet access at work. I'm supposed to, but the temptation to be on ebay all day would be way too high. so I refused the access.

ADIA has 100% of their investments in non-oil related industries. All of their investments are outside of the UAE.

The ADIC also has 100% of it's investments in non-oil industries, but inside the UAE.

largest worldwide investment fund.

Inaccurate. The largest institutional investor is the Bank of Tokyo. ADIA is the world's largest Sovereign Wealth Fund.

A SWF is a fund created by a government to invest that country's revenues (in our case, Oil) some other large ones are located in Singapore, Finland, and Qatar.

When you said world wide investment fund, you lumped in all SWFs and non- SWFs. You cant do that.

In this case however, you arent totally incorrect, since ADIA is not only the worlds largest SWF but also the largest institutional investor in the world (mind you, since it is a SWF, with no shareholders, ADIA has never, and will never have to release any figures. All information about this entity is based on guestimations, or in my case, inside information)

There is also a stub on ADIA on Wikipedia.

Editor said...

I suppose you are referring to the property index that will be introduced in the beginning of 2009 in Dubai.

As for ADIA, it is possible your figure to be near, but I seriously doubt as I know as a matter of fact that they are funding petroleum exploration in Africa.

As for the blind stupidity - this is natural, as people are different, originate form different backgrounds and received different education. It will be boring if all are smart or stupid....the opportunities will be limited.

A Blessing in Tragedy said...

As for ADIA, it is possible your figure to be near, but I seriously doubt as I know as a matter of fact that they are funding petroleum exploration in Africa.

How do you know this as "A matter of fact?"

No, I know as a matter of fact, that they have no oil based dealings.

FourEd said...

The situation in Dubai especially is not good currently due to an overly ambitious expansion plan added to a gloabl recession. The fact of the matter is that Dubai's situation isn't getting any better, with Abu Dhabi funding the completion of Dubai's investement ventures.

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