Abu Dhabi’s Department of Planning and Economy uses Abu Dhabi Media Company’s National newspaper to warn that the capital’s housing market in is danger of a mighty crash.
Things must be serious.
After four days of frenzied buying at Cityscape – with as-yet-unbuilt one-bed apartments selling for Dh2m - it says speculators are in danger of driving up house prices so quickly they risk causing a sharp fall in the market. It is safe to assume the vast majority of Cityscape sales will be flipped well before the projects are ever completed, and that many secondary buyers will also look to sell.
Given that each seller will want to take a profit, and that buyers will have to stump up agency fees, it is not unreasonable to imagine a Dh2m apartment selling for Dh2.2m in a year’s time. That is $600,000 for a one-bed apartment. Not built. Surrounded by building sites. And still two years away from completion. You can buy freshly renovated two-bed apartment, with roof terrace, near Central Park, in New York for less.
Granted, it is not always sensible to compare house prices city by city, country by country. But it is glaringly obvious that some UAE prices are too high. The speculators (and this includes the developers) should enjoy their profits while they can. When the music stops, and someone has to move into a completed apartment – and either pay the mortgage or the rent – it will be a lot clearer whether Abu Dhabi residents can support Manhattan prices.
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2 comments:
I saw that report in The National and was surprised to see mention of gloom and doom - sort of a "caveat emptor" message, or a "don't tell us that we didn't warn you" piece.
Makes me wonder if those in the know can sense that the end is nigh.
Our bank manager tells of a house in Dubai that he went to suss out for a client - asking price $12 million - that's $s not dirhams. When he asked the client why she wanted to pay that much, her reply was, "it will be worth double that in 12 months."
A story from a financial advisor friend in Germany relates how someone he knows about has just lost Euro 120 million in property investments gone wrong in the UAE, and he says that there are more stories like this - it's just that the people who have lost the money are too ashamed to go public about it.
There are a lot of people about to learn some hard lessons, methinks.
you've got to think that most buyers still think the market is going to continue to go up. they're either buying to live in (so getting in ahead of a price rise), or buying to flip at a quick profit.
sense would dictate that if a middle income family - 2 wage earners, bills to pay, cars to run, kids to school - can't afford the mortgage on a two-bed apartment then the market is a bubble. a one-bed at Dh2m, with a mortgage of Dh1.6m would cost Dh15,000 a month. not possible
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