Dubai House Price Inflation

Some of my friends who spoke scathingly a year ago about the idea of buying property in Dubai have decided to take the plunge. Their only problem is now that developers have run out of stock, as one put it there is 'an inventory problem'. And we are not talking about houses ready for occupancy. Developers have run out of property to sell in developments that have not been built yet. In short the architects can not draw up new plans fast enough. Thus buyers this summer are forced to participate in the increasingly lively re-sale market, grappling with a new breed of Dubai estate agent and very much in danger of being 'gazumped'. This is a British term for finding that somebody else comes along and offers a higher price after you thought the sale was closed. Actually in Dubai a common trick is to pretend another buyer has offered a higher price to test the wealth, greed and stupidity of the buyer. But prices definitely are on the way up. As a rule of thumb agents will tell you Dubai real estate prices have been moving up at about 10% per annum for the past three years. This is just an overall picture, and there are no official figures to support it, and clearly price rises vary from location to location. Fall in love with The Palm, Jumeirah and the price of love may prove very high indeed. More down-to-earth options like The Springs, an Emaar complex of 4,000 town houses behind Emirates Hills, are commanding 10-15%, or less if the seller is a speculator keen to get out before having to cough up the full amount. However, the interesting point to note is that supply and demand are no longer in equilibrium, and far from Dubai being saturated with real estate there is not enough to go around. In the heat of the summer perhaps the forces of supply and demand are being held back by the climate and the imminence of holidays, but imagine what may happen this autumn. Certainly developers are working overtime with their architects to dream up new projects, but with all the work-in-progress there is a limit as to what they can handle at any one time. So this autumn we could start to see some serious real estate price inflation in Dubai. One factor that will drive house and apartment prices upwards is the rising cost of building materials, in particular steel and cement, the basic materials used in this part of the world. Developers will have no choice but to pass this inflation on to house buyers and this will tend to push up the price of housing in general; otherwise developers would just stop building because they could not afford to do it. Eventually house prices will rise to a point at which people can no longer afford them, or when speculators can not afford to meet their final payments. But that day could be some years away. The experience of other real estate markets is that booms persist for a number of years, usually followed by a sharp correction and flat prices for some years. The pattern may vary a bit in Dubai, as a very new market, but there is little reason to expect it to be very much different.

Dubai Customs unaffected by crisis, no staff layoffs

The global economic downturn has had no major effect on Dubai Customs business plans. The authority will not make any staff layoffs either, but intends to recruit new employees based on business requirements.
This was disclosed by Abdul Rahman Al Saleh, the Senior Executive Director of Corporate Affairs during a monthly meeting.
The aim of the meeting was to enhance channels of communication among senior, middle management and other employees, discuss directives on best customer service delivery standards and identify business constraints with the aim of producing practical plans for development.
Al Saleh affirmed that Dubai Customs would recruit new employees to overcome lack of manpower at some customs centres. He welcomed the proposal for intensifying staff training programme that would help in keeping pace with customs business interests.



"Dubai Customs always seeks to communicate with all employees as part of its continuous reform and modernisation programme," Al Saleh said.
"Dubai Customs has adopted the open door policy and transparency under which it equally interacts with its people and clients. This ensures no barriers between the management and employees."
Ahmad Mahboub Musabah, the Executive Director of Clients Management Division said: "Such meetings would continue with all divisional employees and any constructive suggestion by any employee serving the business and assisting with best customer service delivery standards is welcomed."

Daimler boosted by UAE investment

Daimler shares have been boosted by Aabar Investment's stake in the company [EPA]
Shares in Daimler, the German carmaker, have been boosted following a $2.7bn investment from a company linked to the government of Abu Dhabi.
Aabar Investments, a fund set up by the Gulf state, said it would purchase a 9.1 per cent stake in Daimler, becoming its largest shareholder.
Shares in the carmaker leapt by 6.26 per cent on the Frankfurt stock exchange on Monday as investors reacted to the news.
The deal comes after the company reported a net loss of $2.1bn in the final quarter of last year as the global financial crisis hit demand for its vehicles.
Aabar's purchase of shares in Daimler, which makes Mercedes-Benz cars and is the world's leading heavy truck manufacturer, will help bolster the carmaker's finances.
The investment highlights the continuing financial power of some Gulf region states despite the global downturn.
The second largest shareholder in Daimler is Kuwait's main sovereign wealth fund, which has a 6.9 per cent stake in the company.
Last December, Aabar agreed to purchase AIG Private Bank, the Swiss-based wealth management arm of the American International Group.

Investment in Dubai Achieving Growth

Dubai Investments reports net profit of AED 488 million for the three months ended 31 March 2008 Achieves growth of11% over the net profit for the same period last year

Dubai Investments PJSC (“DI”) reported exceptional results for the three months ended 31 March 2008 (‘the Period”), with consolidated total income of AED 1.16 billion, 57 per cent more than the total income of AED 739 million for the three months ended 31 March 2007 (“same period last year”). The net profit for the period was AED 488 million, 11 per cent more than the net profit of AED 439 million for the same period last year. These outstanding results were the product of excellent performances by group entities.
Total assets as at 31 March 2008 have increased to AED 11.47 billion, a growth of 66 per cent over the total assets of AED 6.9 billion as at 31 March 2007.
Total Shareholders’ Equity as at 31 March 2008 increased to AED 5.42 billion, a growth of 31 per cent over the Total Shareholders’ Equity of AED 4.14 billion at the same date last year mainly on account of substantial net profits achieved.
The return on average equity achieved for the Period is 9.4% and return on average share capital is 22%. The earnings per share (EPS) for the Period is 0.21, as compared to EPS of 0.19 for the same period last year. The return on average total assets achieved for the Period is 4.5%.

The Business Life in Dubai

A couple of days ago there was a short article in the Financial Times commenting on Dubai's current situation and the media stories about it.It's one of the most accurate, well informed pieces I can recall reading over the past few years.For several years we had the breathless, sometimes hysterical and often inaccurate articles about the growth, the lifestyle, the opulence, the riches, the excesses.A few months back we started to get the tall poppy syndrome articles cutting Dubai down, reporting its collapse, again often ill informed and inaccurate and repeating dinner party rumours as facts.These articles reported that there's nothing underpinning Dubai's economy because the oil has run out and our economy relies totally on real estate. Now the property bubble has burst the economy will collapse.A quote in the FT article sums up the real situation brilliantly:"Disneyland Dubai has crashed," as one Dubai-based banker put it, referring to headline-grabbing property projects, "but the core business model of Dubai remains sound."And that's what all the stories about Dubai don't mention, the basis for Dubai's existence, its history of trading. They're based on the misrepresentation that Dubai began a decade or two ago based on oil income, that real estate is all we now have.The fact is that Dubai evolved from a fishing village into a trading centre around 1830 and has been an international commercial centre ever since, our location being then and now a critical factor in the city's success.A hundred years ago Dubai had the largest shopping district in the area with over 350 shops in Deira. It had a huge pearl trading industry and gold re-exporting industry. Shipbuilding was an important part of the economy too. Doing business was Dubai's reason to exist and it always will be.Oil was an unexpected bonus, not the foundations of the economy - production only began in 1969 - and the economy which was based on trading was thriving without it.In 1960 the international airport opened and then in the early sixties the then Ruler Sheikh Rashid borrowed money from Kuwait to dredge the Creek so that trade could not only continue but be expanded. Port Rashid began operating in 1970 to develop even more trade.When Beirut imploded in the early seventies international companies moved out, mainly to Athens and Cyprus. They soon gave up on those cities because of the lack of infrastructure, telecommunications in particular. Dubai had invested in the future and offered what they wanted, so very many of them moved here.There have always been rumours about Dubai's demise by the way. When Jebel Ali Port was opened in 1979 I remember people laughing that it would be a white elephant, a complete waste of money. It's now one of the world's busiest ports.They said the same about Dubal which opened the same year, and that's now one of the world's leading producers of aluminium, contributing billions to Dubai's economy.Also in 1979 the Trade Centre opened, to more derision and rumours that it was tilting and sinking into the sand. At Jumeirah dinner parties they're saying the same today about Burj Al Arab!Meanwhile Dubai carries on as a commercial centre, with now even more diversification and investment in infrastructure than ever.You can compare the FT article with the tabloid nonsense being published with these two links.In another example of the poor and biased reporting I regularly complain about, last week the UK Sunday Mirror ran a story headlined 'Celebs losing £80,000 a week on their Dubai mansions'.First there's the stupidity of the claim. No-one loses money unless and until they sell a devalued asset.Then readers with any kind of intelligence can work out for themselves by what's written that the thrust of the article is rubbish.It claims that: Celebs who bought the properties in their droves over the last few years have seen prices halve, with pads worth £3.2million in October now on the market for £1.6million.And with the world's superwealthy cutting their losses and selling up, Dubai's bubble has well and truly burst.It also says that England footballers were some of the keenest buyers. "When the squad stopped off in Dubai on their way to the 2002 World Cup in Japan and South Korea, they were shown plans for Palm Jumeirah...(eight of them) put down deposits on £800,000 sixbedroom villas at a special rate.The article goes on: But last October, amid the global recession, Dubai was hit by a housing market crash, which has now cost investors billions.Four bedroom villas worth £3million a couple of months ago are now being sold for £1.5million.So if four bedroom villas are worth £1.5 million, what do you think six bedroom villas are valued at? Remember they paid less than £800,000 for them - so how does the 'journalist' work out that they are losing £80,000 a week? The figures he gives actually suggest their investment has doubled at the very least.It's a good example of the way the international media is now reporting about Dubai, the thrust of the articles being negative regardless of the facts they include.