Home RSS
Real Estate

Consigned to the dustbin of property sector history

The National
Consigned to the dustbin of property sector history - Property - Real Estate - UAE - Dubai

Remember the first time you heard the word “BlackBerry”? A fruit, surely. And Wii? That’s got to be something babies do. Until recently, you might have been similarly perplexed in Dubai by the word “premium”.

In my first encounter, I thought it was something to do with government bonds. Silly me. In this context, it is in fact the profit a speculator makes when he flips, or quickly buys and sells, real estate. Sometimes, this profit can be as high as three to four times the original down payment on the property.

Not too long ago, it seemed almost everyone was involved in the premium game. Smart-suited businessmen, housewives, college students – they were wheeler dealers all.

And, like me, at one time or another you would surely have experienced the scene of sitting at a coffee shop, enjoying a latte as you watch the world swirl around you. Suddenly, your peace is rudely shattered by an annoying person at the next table with at least two mobile phones, “closing a deal” on a property. He would then walk around shouting prices and premiums. Everyone would breathe a sigh of relief once he finished.

You just don’t see these men any more. Why? Because “premium” has dropped out of use, and the “premium guys” have melted away. Today, a new phrase has entered the lexicon: “What’s the OP?”

For the uninitiated, OP means “original price”. Prospective buyers now are insisting on information about the price at which properties originally sold. No one wants to part with their cash unless they are comfortable they’re buying at close to the OP.

An insatiable appetite to go faster or get bigger and stronger led to escalating premiums, with transacting in property resembling a night out at the casino. I remember a fist fight at the launch of an off-plan project.

In just days, buyers – or speculators as we like to call them today – could make returns in the double-digit percentage range. Now that’s easy money.

For me, the danger point appeared when prices of off-plan properties at their launch soared above ready-to-move-in properties of equal quality and in similar locations. It simply made no sense. It is precisely the frenzied bidding up of premiums that has led us to the unhappy situation we are in today. Everywhere you look, you find people glum and down. No matter who you talk to, everyone is an oracle of doom.

But things really don’t need to be this way. Let’s look at the basic commercial facts.

Conventional wisdom aside, the market presents some great opportunities for buyers looking to make a healthy, but not excessive, profit.


Disclaimer: The information presented and opinions expressed herein are those of the authors and do not necessarily represent the views of Estates Report and/or its partners.