Click here for the top 10 rankings in the regionOctober 8, 2015 6:09
Negative equity hurts
70 percent of expatriates who bought property in the UAE will lose money if they sell their properties today. It’s nothing new, but at least we have the numbers to prove it.
April 6, 2009 12:39 by Dana El Baltaji
A survey conducted by Real Opinions, a market research company, shows that four in 10 expatriates in the UAE have bought properties, and seven out of 10 of those who have bought properties will lose a chunk of their investments if they sell them. But, of course, no one’s buying… that’s a different story.
Furthermore, 22 percent of expatriates who have bought properties in the UAE are unable to make their next payments.
While that nugget of information isn’t new, it gives a quantitative data on what most market analysts already accept as a given.
“We’re trying to put things into perspective,” Dan Healy, founder and CEO of Real Opinions, said to Kipp. “We’re trying to encourage an open discussion based on facts, rather than suppress discussions because of fear.”
“A lot of people say they don’t know the situation. For anyone in business it’s important to know what is happening now.”
He adds: “So it’s one thing to say there’s a problem, and it’s another to know the magnitude of the problem. The powers that be need to know the extent of it.”
Media reports suggest the value of properties in Dubai have fallen roughly 35 percent since the market’s height in mid-2008.
“In light of falling property prices,” Healy explained in a press release, “we asked further questions to those still paying installments on property not yet fully constructed. We found that 1 in 4 said they are unlikely to pay the next installment and this could produce challenges for some developers requiring the capital to complete future stages.”
Given the economic crisis and its stranglehold on credit, how will negative equity affect the property industry in the latter half of 2009?
In other words, once banks begin lending again, whenever that may be, and surveyors estimate Dubai’s property prices to be significantly less than what many buyers have paid, how will expatriates meet their contractual commitments? What will happen to the market then?