as an investor in dubai,and someone who has been sucked by the sales hype through inexperience,I have to say I don't paint too much of a rosey picture for the dubai property market. My property has been on the market for a year,not one single enquiry.The supply of new build property is such that oversupply will occur well into 2009/2010,which does not bode well for an exit startegy.On top of finance,my mortgage application has ground to a halt,I really can't see why anyone would invest here,unless you are a cash buyer,or naive like I was. Its a classic situation of oversupply,and investor saturation,but some will come out ok no doubt,if they have the right property,in the right location.But as a whole,alot of the foreign workers who currently work there,ie,indian and pakistan workers,cannot afford to rent these properties,as there wages are very low,even at professional levels.I just don't see the potential now.

I also advise against investing in Dubai for the following reasons. - there will be an oversupply of property in the market from Q3 2007 through to 2009. Colliers estimate in 2009 for example 77,000 units will come onto the market yet they see new demand at only half that. I don't know if that takes into account projects yet to be announced and there seems to be a new mega project announced each week. I also don't know if it takes into account the fact that a lot of people who have purchased off plan are in it to get rich quick rather than to actually live in the place.....more properties could be flooding the market because of this. - developers are starting to offer big discounts yet the cost of building is going up. why?? possibly due to cashflow problems in which case beware! - even if the market is great, how do you find a developer you can rely on and are there laws to protect you? From what I know, I wouldn't want to go anywhere near even the government backed developers who are supposedly the most reputable. You will do very well to find someone who responds to your queries and do what they promise to do. You could end up relying on people that are simply not reliable enough to even do the basics such as provide receipts for instalment payments, deliver contracts, communicate with their customers. If they cannot get those basics right, how are they going to deliver projects in line with specifications and on time, and where can you go to if you have problems? You don't have consumer watchdogs and legal protection. You do not have a democracy either. - all the property built seems to be at the luxury end of the market. There is not an even balance of property available for middle income and low income workers. If you need to rely on rental income for luxury properties you will have a lot of competition. - Neighbouring emirates such as Abu Dhabi and Ras Al Khaimah are copying the Dubai model with cheaper property prices. Abu Dhabi has far greater resources than Dubai so I would not be surprised to see it surpass Dubai in the long term and it can watch and learn from Dubais mistakes. - Will the rich and wealthy really favour Dubai in years to come? I think that Oman will become a more attractive destination for the rich to holiday in. - With the conditions that the indian and bangladeshi builders are working under, is this an ethical investment? I understand the argument that it is their choice to come and work in Dubai, but if the conditions are far worse than they expected, can they walk away from the job? I do not dispute the fantastic GDP growth of the Dubai econcomy which is what attracted me to find out more about the place. I've seen there is far too much risk for me to invest into Dubai property. Some people could do well out of it but you'll need a lot of luck to avoid all the pitfalls.

Yes, I concur with the above comments....my brother-in-law has been out there the last few months and he is experienced in property development and all of the above is very relevent. Avoid I would say...there are other sectors far better as an investment. Given the recent (up-beat?) PS article, it will be interesting to see in a few weeks/months whether PS offer some properties here!!

Yes, Dubai is quite unlike anywhere else in the world, and I think the PS article conveyed that quite well - rather confused and full of contradictions! I've lived in Dubai for the past ten years and am a financial commentator, of sorts. I bought myself on the very first day that the first budget-villa project was launched (called The Springs) and we watched in amazement as a new city was created out of the desert. That's nothing special now though! At the time, the purchase was a no-brainer: it was obvious that there was a lot of pent-up demand, and the prices were set so reasonably low (to tempt individuals to take the plunge) that we worked out that even if the house depreciated to 50% of its original sale price, after five-six years, we would still have been better off owning rather than renting. On that basis, we went ahead and bought - with all of our expat friends telling us were being crazy and taking a big risk. When we moved in, after all the inevitable delays (contractors went bankcrupt at least twice etc) I was so shocked at the poor quality, and the fact that there seemed to be loads and loads of these empty houses in the middle of nowehere that we decided to sell. This was two and a half years after the original purchase agreement. Our house had appreciated by 60% by then, and I figured that wasn't a bad deal - considering leverage and all. Of course, since then property prices have continued to rise - crazily so - with our house now "valued at" more than double what we sold it for. And there's the rub. Spectacular gains have been made - and Dubai's rulers have delivered on their promises, and they have an honorable record of doing so - but I can't really see where the profit margin is for individual investors buying now at these prices. Current asking prices are comparable to major European cities (which, umm, Dubai certainly isn't....) which strikes me as remarkably bad value. It's also interesting to note that home loans are roughly twice as expensive as boat loans - does that seem normal? I love Dubai, and love the opportunities that exist here: but I just can't see value in the retail property market if you're buying as a consumer. Of course, if you're buying as a developer - and someone else is taking your risk - that's a different story...

Hi Robin and the others. I also agree with what you have written. However, I still feel that if you had bought at the right time then it is still a good investment. Freehold has been introduced, mortgages are easier to obtain and the future I think is good. I have bought on the Palm Jumeriah and I have already been asked by the developper if I would like to sell to cash buyers. I am going to hold in there as I have been told that I should be able to obtain a high rental on the Palm. Of course there is a cap on rentals, 7%pa. I think this is normal, which is why most of the workers, especially the constr.workers can't afford to live there. There is a demand for social housing for these people, and the oversupply is in the luxury end. True, abdu Dhabi only 30mins drive is a better and more affordable option as an investment. Lynn

Thank you to all for comments. I looked at Dubai in 2003. Later in career might consider a semi-retirement job there (I am a doctor).

I would look at Dubai purely from a long term rental income stream approach ie. obtain a property with a view to paying off and long term rental income. Does anyone think this is a realistic option? I await the torrent of replies warning me off!!

Paul - Dubai currently has some of the best rental yields in the world because the supply cannot meet the demand in the market. With the huge amounts of projects to complete in 2007-2009 the market will change significantly so yields will drop off.

I've bought two off-plan purchases in Dubai Marina will be built in about 2/3 years time. One bed apartments costing around £120k which if let today could command rent of £15k p.a.each. Costing me about £600 p.m. interest only funding so rent easily covers finance. May see a dip in rents though by time built but perhaps not, sure to be a better yield than in the UK. Also only 1% of purchase price fee to pay at Land Registry, did not need solicitor as buying off major developer as contract looked fine to me. No VAT on purchase unlike in Europe so total fees are £1,200 per property. No local taxes on anything so no rental or capital gains tax.(Of course would have to declare here in UK as UK resident). May live in Dubai in a few years time and sell some of my rental properties in UK & Dubai so no capital gains tax to pay in UK or Dubai at such time as will be non UK resident. Gets Gordon Brown off my back ! I reckon it's one of the best countries to invest will be like Hong Kong or Singapore in 10/15 years time with property prices to match. Excellent long term potential but would stay away if looking for quick returns.

Hi Alan Interesting comments all round on Dubai, I think. I’d just like to come back on your suggestion that the article is ‘up beat’ and may be linked to a forthcoming deal, if I may. First, I must point out that Tony Booth is an independent writer and investor. He wouldn’t sing to any PS hymn sheet, even if there was one. His views are all his own. That’s why we think they’re interesting. Second, if PS evaluates a market and comes to a positive conclusion, we say so unequivocably and put forward our arguments; that way you can make up your own mind whether you agree or not. Third, if you look at the sub-headings in the article, you’ll find: ‘Unproven as an investment location’ ‘Where's the secondary market?’ ‘Developers are making the profit’ Followed by Tony’s conclusion…. ‘The question we need to consider is, in ten years time will we all still be able to smile contentedly and share the joke - or will Dubai's developers be the only ones laughing?’ Up beat? Cheers Robin

I ahve read with great interest the comments that have been made so far. I think that the article was very acurate. I have lived in Dubai for seven years, I am an investor as well as an owner of a letting and management company dealing with investment properties, whilst I think it was a good idea 3/5 years ago if you had the spare money to risk, I also think today is a good investment for people who live here and have a large company housing allowences. Also a great place for holiday or semi retirement (great place to escape the bad winter weather).The rent has been capped for the Landlords that follow the rules. however there is nothing to stop landlord after a year requesting the villa back for family then hicking the rent up in some cases more than double. Have to admit I havent bought and are still very happy with the slower growth we continue to see in the UK where the legal framework is and has been in place in some cases hundreds of years, as interests look set to rise we again will win in the PRS. As always as investors we have to be in it for the medium to long term.