# Property Prices - Buy or Wait



## shotcaller (Dec 20, 2013)

I've been thinking of taking the leap from being a tenant to the master of my domain . The trouble is that the prices have just gone in one direction since the past few years and now, I've over-stretched my budget to the point where I won't be able to buy if prices rise further. However, I'm beginning to wonder if the current prices aren't a bit OTT as it's all due to the Expo which probably won't even begin to make a difference till 2016, IMO.

Therefore, is it worth buying now or waiting till the market realises that current prices aren't sustainable and the prices come down to a more reasonable level. Any suggestions?


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## ash_ak (Jan 22, 2011)

Definitely wait, emaar first quarter 2014 results showed their villa sales have fallen by 17%.


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## MAW0504 (Oct 6, 2009)

Asking prices have gone too high too quickly and it seems that this time sellers have realised it and are starting to lower their expectations and are reducing their prices. The general view from inside the industry is that the market will correct by 10% once through Ramdan. So either wait until then or start offering 10% lower than advertised price now and see if anyone takes. 

Confidence is still high in the Dubai market generally though so once through Ramadan you will face more competition and see prices slowly but sensibly start rising again. For once it is predicted that we will have a calmer and more stable market right through the rest of the year.


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## Asdfgh (May 24, 2013)

Did this analysis for a friend and conclusion was: Buy if your aim is 

1) Longer term (10 years) investment horizon and if you intend to stay in the apartment. 

If you want to wait till 2016 : consider how much is the additional rent you would have paid in the next 2 years. What % of the current property price is that. Did this calculation for a friend and the differential was 16% of the actual price of the property. So will the property price reduce by 16% in the next 2 years... ?! probably / probably not. The deal was that even if it does decline by 10-12%.. you are covered by the rental you would have saved (accounting for 4%registration and other charges. no brokerage in this case). 

Second point to consider is that if you do wait that 2 years more to invest.. it implies 2 years further for loan repayment. This friend has a kid who will be college going in 10 years (loan period). So wants to avoid a potential loan overlap for kids higher studies.

As per the analysis we did. Purely basis the savings on rental over a span of 10 years.. even if the property prices fall 5% every year for 10 years (and the potential savings on rental also fall), he will not lose money after 10 years. he will make an overall yield of 8% on investment. Of course, had he invested this money in some other instrument what could the earnings have been is another story and highly debatable.


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## Asdfgh (May 24, 2013)

btw..I am quoting a specific case on which we build our analysis. I can share more details if you need..


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## Tropicana (Apr 29, 2010)

Does your analysis cover service charges and the bank's interest rate?


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## Asdfgh (May 24, 2013)

Tropicana said:


> Does your analysis cover service charges and the bank's interest rate?


Sure does. It also includes property insurance / life insurance for the 10 year period. 

Basically includes the 6-9 % additional charges that have to be incurred while buying a property.. have been factored in.


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## scrappydoo (May 20, 2014)

Never in a month of Sundays would I buy here - the build quality is shocking, prices hyper inflated (my apartment, one bed in Dubailand, sold for 895,000dhs in January, an identical one in the same block has just been sold for 1.4m dhs). Personally, I would invest in more solid bricks and mortar elsewhere.


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## Berliner (Jul 18, 2013)

buy in your own country. Why invest in a country where the laws change often.


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## rsinner (Feb 3, 2009)

scrappydoo said:


> Never in a month of Sundays would I buy here - the build quality is shocking, prices hyper inflated (my apartment, one bed in Dubailand, sold for 895,000dhs in January, an identical one in the same block has just been sold for 1.4m dhs). Personally, I would invest in more solid bricks and mortar elsewhere.


Just out of curiosity, what would 1.4 m Dhs (c. 230,000 GBP) get you in London?  THAT is the real hyper inflated market

I am not a big fan of the volatile real estate market, but what laws have changed which will affect someone who bought property say 10 years back? (if the property is still standing  )


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## w_man (Apr 16, 2010)

rsinner said:


> (if the property is still standing  )


That's the reason I wouldn't buy here!

I don't know about UK but in Canada 1.4m aed would buy a decent apartment - depends on which city of course but the build quality is far better. My parents house is about 24 years old and just now requires some basic renovations eg: just got tiles replaced in parts of the house. My condo back home is 8 years old and i can't think of anything to fix or renovate.

We moved into this Emaar apartment just over 3 years ago when it was brand spankin new .... plumbing seems to be done by a handicap gorilla. The rest of the building is slowly falling apart - elevators are always acting up and the finish is slowly fading away. But it's by far one the best buildings in the Marina lol


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## Berliner (Jul 18, 2013)

Excuse me, but did you just compare London to Dubai?


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## nite (Apr 11, 2012)

scrappydoo said:


> Never in a month of Sundays would I buy here - the build quality is shocking, prices hyper inflated (my apartment, one bed in Dubailand, sold for 895,000dhs in January, an identical one in the same block has just been sold for 1.4m dhs). Personally, I would invest in more solid bricks and mortar elsewhere.


100% agree. Everything is cracking and falling apart in a few years. Once a place gets worn (i.e Springs, Discovery, JLT, old Marina buildings, etc) it's a financial drain to upkeep and it's old news for incoming buyers. Why buy something old and dated when there's always 10's of thousands of new homes coming online. Maktoum City, Meydan, The Lagoons (Ras Al Khor), and the dozens of other developments will continue to pump supply. That being said, if any asset bubbles pop on the macro scale, they will be giving these places away as the economy will contract and everyone will be selling. That would be the time to buy. However, if it's cheaper to buy, which by all indications it is, then look for something newer by Emaar. Even though some have complained about plumbing, electrical, foundations and the other questionable quality issues, they do seem to hold up better than Damac, Nakheel, etc.


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## rsinner (Feb 3, 2009)

Berliner said:


> Excuse me, but did you just compare London to Dubai?


Yes I did. Feel free to refute. I am listening. Not that I am investing in either market.
I believe both markets are overpriced.


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## scrappydoo (May 20, 2014)

rsinner said:


> Just out of curiosity, what would 1.4 m Dhs (c. 230,000 GBP) get you in London?  THAT is the real hyper inflated market
> 
> I am not a big fan of the volatile real estate market, but what laws have changed which will affect someone who bought property say 10 years back? (if the property is still standing  )


230,000GBP would buy me two modest houses in the UK - why everyone is obsessed with London amazes me. Two houses, two rental incomes, reduced risk if one is vacant and the opportunity to release some capital by selling one if the need ever arises and rock solid build. These would be viewed as a long term investment - not an opportunity to make a fast buck as investors here seem to think and so any rises and falls in the UK would not have much of an impact on any cash buyer. If you are reliant on a mortgage, good luck with the interest rate rises forecast for the UK later this year.

230,000GBP would also buy a massive property in some areas of France at the moment too - not everyone's cup of tea I know.


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## TallyHo (Aug 21, 2011)

As a beneficiary of the London property boom I'm happy with the high prices 

But I do think housing prices are ridiculous and unsustainable. However, outside London prices are much cheaper, so you have a wide range of options of where to invest in the UK, unlike in the UAE. 

As for the UAE, I remember a few people on here asking about investing in property back in 2010(?) when the market was at its nadir and we, including me, said hell no. Obviously we were wrong and if I'd bought in 2010 I'd have made a very tidy profit by now if I sold this year.

For the long term, however, the quality issue does bother me. I also live in an Emaar property with all the bells and whistles and the quality has deteriorated over the years. The facilities are kept in good shape but the there's cracks in the walls, the kitchens (which were crappy to begin with) are crappier and cabinets misaligned. The wear and tear is rather impressive given the building is only, what, 6 years old? And driving around the Springs/Meadows one sees the deterioration all over the place and a bunch of properties have already been rehabbed, and they're just barely ten years old.

Having said that, prime locations are likely to remain prime locations for convenience reasons compared to newer properties much further out. If I had to buy for the long run I'd focus only on Emaar and a community close to Sheikh Zayed.


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## rsinner (Feb 3, 2009)

I would like to make a calculation along the lines what asdfgh did, and I am sure could arrive at a similar conclusion. However, 4 years back, I was paying 90K in rent and my landlord was paying about 22K in service fees (now the rent is up to 130K ish I think for the same property).
so if I were to list things
1. Service fee is a concern
2. Quality and longevity is a big concern
3. Mortgage rates - not a big item, but banks do change the (opaque) base rates on which they are based
4. My biggest concern - unless you have (a lot of) spare cash lying around, you need to take on a mortgage, which is backed by security cheques. In this day and age, no job, esp. in UAE, is for a lifetime or even the life of a mortgage. So yes, theoretically owning a place saves rent, but if you lose your job or change jobs it is going to be a very BIG issue. Hope whoever buys here has a plan of action in mind.


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## Mr Rossi (May 16, 2009)

rsinner said:


> Just out of curiosity, what would 1.4 m Dhs (c. 230,000 GBP) get you in London?


Quite a variety of 1-2 bedroom apartments, leading to 2-3 bed terrace houses depending how far out you went and if it needed any work.

As an investor you could easily put that to work in multiple ways and get a good return over a 10 year period.


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