One particularly worrying aspect is the number of developers who are now admitting publicly that they do not have the finance to continue. The banks won't lend anymore to developers or buyers. See the Property Wire news section for the latest announcements on developments being cancelled or halted.
There is a particularly funny, but worrying, thread on the propertycommunity.com forum which recites a scenario in a real estate developer's office in Dubai complete with boss with fat cigar and Rolls Royce.
While it is an entertaining read it also highlights a very serious problem. Developers simply don't have the money to finance huge projects. It also shows that they are trying to flout Rule 13 which was recently introduced to protect investors.
A second thread on the same forum gives the full text of a letter sent by London and Dubai-based property wealth manager MiNC, developer of Prodigy 1 in Jumeirah Village South to investors asking for extra payments for apartments to enable it to carry on with the project after two banks withdrew funding.
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The letter states that if investors don't pay up then the project will stop. Despite rules to protect investors it would appear that if the investors don't agree to pay more for apartments they have already bought they could be regarded as cancelling their contract and the developer could be entitled to 30% of what has been paid so far.
One poster who has taken legal advice states: 'Basically any investor, who cannot continue with his contractual payment plan, will be at the total mercy of the Developer.' But there is hope as the Developer cannot actually cancel the contract direct; this has to be done by the Land Department.
Others suggest investor group together to have more of a voice and contact both the Land Department and regulatory body RERA. It is undoubtedly a worrying move by a developer and this may only just be the beginning.
These threads also highlight problems with Law 13, particularly Article 11 that deals with the contract between developer and purchaser. It was introduced to regulate the situation and make it clear what is and is not permissable on both sides in terms of cancelling or breaking contracts. But it is so new that it has not really been thoroughly tested and as the posts on these forums show it is not yet clear cut and there are obviously those who are seeking ways round it.
Not many posters have positive thoughts on the Dubai market at present. Some are. Indeed, quite vitriolic. 'A bunch of greedy short-sited vultures,' is one of the more pleasant descriptions on the estateagentsdubai.com forum. It is a sign of changed times. Just a year ago everyone was on a high, prices were booming and investors were basking in the glow of the money they were making flipping.
The sensible approach is to see what can be done, if anything to improve the situation. And one poster points out that looking at what happened in Hong Kong in the 1980s and Singapore in the 1990s shows that the property market in Dubai can rise again or sink depending on the approach.
Hong Kong managed to bounce back after prices fell 33% in six months. It managed its supply and demand well and the property market recovered within 18 months. In Singapore the government bought up property that wouldn't sell and rented it back to the people. It is still suffering as a result.
This is important for Dubai as next year will see a lot of projects reaching completion next year. Those who are bearish say the demand won't be there. The bulls say demand will continue to outstrip demand for many years to come.
But if the banks won't lend who can buy? The speculators can't meet their next payments and they can't sell either. But it hits at the heart of the ethics in the industry. More regulation is needed but there also has to be more transparency and less greed.
As one poster Stuart Roe says; 'We all know there are ill advised speculators in the market but we can get them out discretely, when they are gone we can start to rebuild a thriving real estate economy.'
Another issue grabbing the headlines on the forums is so-called bargain properties. Under current conditions it is not surprising that developers and real estate agents are desperately seeking buyers. But their tactics do not always please potential property investors as a thread on the propertysecrets.net forum.
One investor declares he is fed up with his email inbox being chocked everyday with apparent wonderful offers. He says the few offers that he has looked at have turned out to be absolute rubbish.
'It's all hype. Every single purchase that I tried turned into a nightmare. Either the financing has hit a dead end or the deal hasn't stacked up properly. The bottom line is that companies are simply not doing their due diligence before rushing the specs to their marketing departments,' declares Rehman. 'I am a serious property investor who would love to use the current climate to add a few good bargains to my UK portfolio, but I am fast giving up hope,' he adds.
It is a fair point. As others point out good deals are out there but they are difficult to track down.
