Current News and Dubai property Situation

What Happened

On 26th November 2009, one of the Dubai companies (Dubai World, owners of Nakheel, UAEs largest developer) said that it needs at least 6 months more to pay part of its debt (approx $9 billion) of a total debt which is about $60 billion. In total about $26 billion of the Dubai Word debt is to be re-structured. Most of this debt has arisen due to Nakheel, where customers have stopped paying the developer for off plan-properties (purchased in 2007/2008), as they fear that the values of their partly paid off-plan properties (which have not yet started construction) has gone down, or that these may never be built. Nakheel is still operating but has no surplus money to pay back loans, and many of the projects have been cancelled. Dubai World accounts for most of Dubai’s debt which is a total debt of around $80 billion. We, in the property business and many in the UAE have known about this for many months and the obvious fact that eventually Nakheel would need to be re-structured. That is why over past 6 months, we have been only recommending purchase of ‘ready’ or ‘nearly ready’ properties and not ‘off-plan’ properties.

Why was it Big News

However, the formal release of this information was badly timed and done in amateur fashion. As Dubai World is a Government owned entity (although it is not the government), many have taken a possible default by Dubai World as a default by Dubai Government and by extension a default by the UAE, the country. Also the press has failed to make the distinction that Dubai is a state within the country of UAE and positioned this request for debt deferral by Dubai World as a sign that UAE and other countries could default on their debt leading to another worldwide financial crisis

Why is it not as bad as it looks in the News

Dubai is a state, part of the UAE just like California (another state having financial concerns) is part of the USA.
The UAE is the world’s third largest exporter of oil and one of the richest countries in the world with one of its surplus funds being over $700 billion. Most of this wealth lies in the state of Abu Dhabi which accounts for around 90% of UAE by land and over 98% by oil production. Many of the Dubai assets are already owned by sheikhs in Abu Dhabi. The country is UAE – not Dubai and UAE will not go bankrupt. The UK is more likely to go bankrupt than the UAE. The UAE central bank has already issued re-assurance and cash availability (if needed) to all banks operating in the UAE.

Likely Net Effects

-The excitement will settle over next few weeks.
-Dubai World will be split up. Good companies may be sold/floated. Poor companies like Nakheel will be re-structured. Some creditors may indeed not get paid in full (like General Motors). Many creditors had already assumed this to be the case.
-Many of the assets in Dubai will eventually be owned by companies whose ownership lies in Abu Dhabi (rather than with the sheikhs of Dubai)
-Dubai will not become bankrupt (the source of funding and ownership of many Dubai owned companies may change).
-There may be cut backs on funding and lending to developers in the future (from all sources) – thus a reduction in future property construction. As Dubai economy is still growing, with net growth in population, even with the current recession in construction, this will result in property shortages – not excess. Our overall forecast is that property prices are at rock bottom (having fallen over 40% to 50% in most areas since October 2008) and will slowly increase over next 2 years.

2.WHAT DOES IT MEAN FOR YOU – Effects On Property Market

Owners of Ready Properties or Nearly Ready Properties
Keep your properties. Do not be panicked into selling at a distress price. Overall there are likely to be shortages of ready properties as many future planned projects will be cancelled or severely delayed. Sell at end of next year if you must sell.

Off-Plan Owners – not started construction
This means that your building is even less likely to start construction and is more likely to be cancelled. If it is cancelled, you may get some of your money back. Do not make any further payments unless you have a good construction linked payment plan and your building has definitely started construction with on-going construction – Get Pictures or visit the site yourself.

Possibly Looking To Buy - New Buyers
-Only buy properties that are ready or are nearly ready. Do not buy off-plan properties even if discounted, as these are unlikely to start construction in the next few years.
-If you are considering a ready or ‘nearly ready’ property, then now is a good time to buy, as prices are rock bottom, and we forecast a shortage of ready properties over the next few years.

3. A “BEST BUY” PROPERTY IN DUBAI

In the current environment, we believe the following is a best buy property in Dubai. It is nearly ready, yet still comes with a very good 3 year payment plan.

-The full 36 page brochure on this property. You can download it by clicking the link
Cordoba Palace Buyers Guide – DUBAI – click link below to download the brochure.
http://www.openshoreproperty.com/download_brouchers/property2

-The typical payment plans are attached in the spreadsheet – very good
-Floor plans of 1 bed
-Picture of the building & recent current construction picture
-Current availability list (shown below).
-The reservation procedure is shown below at the bottom.

Here is a quick summary.

Pricing

The pricing is very attractive and is equivalent to around 670 AED per sqft. The building is over 90% sold which is a good sign and all the main structure and floors are complete. The developer kept back about 30 units for sale on completion but has released them 6 weeks ago as they wish to focus on another building. We have sold about half of these over last 6 weeks. The sale price on these units is very attractive and some of the units have been retained by our own staff. The pricing offered now is almost half of the peak price last year. 1 Beds from £95K, Large 1-beds from £117K, Massive 2 Bed (only one on each floor) from 167K.

Location
Property is located in DUBAI within the Residential district of Dubai Silicon Oasis (DSO), at the entrance to Dubailand. This location is prime as the property is attractive to people working in the IT industry nearby and also to visitors to Dubailand. This is a central location within the new Dubai. The property is next to the main DSO Shopping Mall which usually carries a premium.

Property
The property is called Cordoba Palace. It is a low to mid-rise (8 floor) building with 16 apartments on each floor. There is a mixture of Studios (all sold now), 1-Bed and 2-bed apartments. The tower has all the facilities including rooftop pool, gym and other services. All apartments are well specified. See the full brochure link below.

Developer
The master developer is Dubai Silicon Oasis Authority which is a Dubai Government body. The community is divided into two areas – Business and office areas of the ‘free-zone’ with multi-national IT companies; and a ‘residential zone’ with Villas, mid-rise and high rise apartments. The developer of the tower is S. K. Developers and the tower is built to DSO Authority specifications and is overseen by the DSO Authority. The infrastructure of DSO is well advanced. And has benefits of the DSO master community.

The full details of the master developer is at the main website www.dso.ae . This deals with the infrastructure and also the incentives available for companies in the free-zone (business areas)

RERA- Approved- The developer, the project, he master developer and Escrow Account are all RERA Registered and Approved (documents available). RERA is the Dubai Government Real Estate Regulatory Authority.

Completion Date
The building was launched 3 years ago. Construction started about 18 months ago. The main structure for all the floors is complete now. The official handover is August 2010 (in 9 months).

Payment Plan
-Approx 14% on booking, 15% in 3 months, 14% in 6 months (Approx total 42% before completion)
-Then 15% on handover – expected to be in about 9 months.
-Then 6% every 3 months post completion for almost 2 further years. The last payment is 8%. Most of the post-completion payments could come out of rental income, meaning the property only costs you 60%.

This is currently our best buy property because:
-Main structure already completed and it will be handed over in August
-Good payment plan
-In Dubai
-Prime location for rental (long term and holiday lets)
-Car Park included at no extra cost
-Dubai Government Masterplan and ultimate ownership & RERA Approved

Reservation Procedure:
1. We will need some Personal Details from you (see below).
2. We will then log these with developer and allocate the apartment to you
3. The Reservation/Sales Agreement will be sent out to you
4. There will be comprehensive Instruction Sheet that will be included explaining exactly what to do and how the purchase process works.
5. You need to print out and sign the documents (or we can post these to you) and post these back immediately together with copies of your passport photo pages
6. Make the first payment (The instruction sheet will explain how to do this). The first payment can be made with the help of your bank. We can ask Currencies Direct (affiliated with HSBC) to provide better exchange rates for you and handle the payments for you in the future to make it easier. You need to fax or email to us, the proof of payment which you will get from the bank (or Currencies direct).
7. We forward your documents and proof of payment to the developer
8. Developer signs documents and issues receipt. We will send you the developer signed documents & receipt (takes about 4 weeks).
9. We will keep in touch and provide any help as and when needed.

Although you have a direct relationship with the developer, we will keep in touch with you and near the time of the completion of your property will offer our services to re-sell or rent-out (if required).

Details Needed For Agreement:
-Full names of buyers (e.g. you and your partner if both buying)
-Nationality
-Passport Number
-Home telephone number
-mobile phone number
-Email Address to go on agreement
-Full Postal Address (agreements will be sent here)
-Physical Address (if different from above)

Contact us for details and brochure.