Have a read of our CEO & Founder Michael Lahyani’s latest column in Khaleej Times…
It has recently been reported by the Dubai Land Department that in the first nine months of 2012, the total value of property transactions in the emirate soared to a whopping Dh83 billion.
According to the statistics published, sales dominated, with 20,925 deals valued at Dh43 billion recorded — more than fifty per cent of all transactions.
While this apparent boom is good news for Dubai when put in the context of the ongoing global financial turmoil, I feel uneasy about the nature of this massive spike in property sales transactions and think the industry needs to raise a red warning flag right now.
From reports I have heard first hand, the big developers are in danger of slipping back into the bad habit of 2006 of launching large new projects and offering very low down payments — often at as little as ten per cent.
This of course encourages speculators to swoop in, snap up an apartment or villa and flip it straight away. I know personally of cases of people buying a property with a tiny down payment in Dubai and selling in on the next day — at a profit of around Dh300,000. Of course I understand the desire to increase property transactions in the city as it will obviously help fuel the comeback of the real estate industry, but we must not achieve this goal at any cost.
Right now there are thousands of properties off plan in Dubai which are falling prey to this practice and it can only lead in one direction — to the creation of another bubble. Surely, we must avoid this nightmare scenario by any means possible.
Many in the industry feel now is a good time to start protecting the property industry by imposing limitations that will drive out the speculators who brought it to its knees so painfully in recent years.
Not long ago, I bought an apartment in my home town Geneva, Switzerland and had to pay a substantial down payment. Not only that, but I am now legally unable to sell on the property for ten years. The result of these restrictions is that properties in Switzerland will actually have more people living in them, which is good for the economy — and the country itself.
In Dubai, it would be great to see our amazing, world-beating developments going straight to the end user and not simply be a vehicle for anyone and everyone to make a fast buck. It would also erase the chance of a repeat of the boom and bust we are still just recovering from.
We need to get back to the concept that homes are built to be lived in and that a vibrant city like Dubai will do best when it is properly inhabited with people building real lives here.
I believe the green shoots of economic recovery will really take hold if as many people as possible put down their own roots first.
