Most people probably believe that Dubai is home to a vibrant and luxurious property market. However, those more familiar with the UAE city-state know that this apparent real estate oasis in the desert can become investment quicksand the moment you sign the dotted line.
When you purchase property in Dubai, you immediately begin paying – whether the home has been built yet or not. In many respects, the UAE property market resembles that of China; it is a huge sector of the economy, it has resulted in thousands of empty buildings, buyers have always operated under the assumption that values will continue to rise ad infinitum, and when developments are aborted, property purchasers are left penniless. One of the key differences with China is that most investors in Dubai property do not live in the homes they buy; they assume they will be able to rent them out for profit. This assumption is increasingly dubious, as the UAE has hiked interest rates by 225 basis points since the beginning of the year, and rental prices are expected to decrease in the coming months, partly due to the abundant property overhang in the market.
“When we see headlines about hundreds of millions being transacted in Dubai’s real estate market”, says Radha Stirling, CEO of Detained in Dubai, “We never get the follow-up stories about unfinished developments, buyers being forced to pay for years without their homes being built, investors losing their life-savings when projects are canceled, developers being jailed for life – Like Ryan Cornelius – when local banks decide to arbitrarily suspend credit; mortgage-holders criminally charged when their security cheques are illegally submitted for payment and returned; and any number of other scandalous experiences that almost inevitably occur when foreign nationals enter the property market in Dubai.”
“We have supported clients who invested hundreds of thousands of pounds, even millions, in what they thought would be a dream home, only to discover that the development is either postponed, or unfinished, with severe maintenance problems, indifferent management, promised amenities cancelled, and even snake infestations,” Stirling continues, “We have seen innumerable investors go bankrupt trying to recoup their investments on properties intended for rental, paying mortgages and service fees that surpass what they can charge potential occupants. In the case of Dubai, we would not simply caution ‘buyer beware’, but rather, ‘buyer begone.’”