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5,000 Irish investors hit by Dubai property collapse
29 November 2009 By Michelle Devane
About 5,000 Irish people who bought properties in Dubai face a further collapse in the value of their investments as a result of the emirate’s debt crisis, property experts have warned.
Property prices in Dubai have already halved from their peak, according to Deutsche Bank, but further falls are expected after Dubai World, the government-owned investment firm, said it was seeking a six-month standstill on its debt repayments.
Dubai World and its Nakheel subsidiary were behind major projects such as the Palm Islands, the Dubai Waterfront, The World and The Universe Islands. Its residential projects include The Gardens, International City, Jumeirah Islands and Jumeirah Lake Towers.
At the height of the Dubai boom in 2007, Irish investors were buying one-bed units in the World development for up to €700,000. However, Ronan O’Driscoll, director at Savills, said the property boom in Dubai was based on ‘‘pure and utter speculation’’.
‘‘It’s no surprise at all that this [collapse] has happened. The simple fact is that too many apartments were being built. It was unsustainable. Investors who got in very early did well if they sold. But most didn’t," said O’Driscoll. He said that Savills never sold property in Dubai, Bulgaria or Turkey because it was ‘‘nervous about the locations’’. He estimated that about 5,000 Irish people had bought in Dubai since 2002, but other sources have put that figure closer to 10,000. O’Driscoll said that the government in Dubai never regulated the overseas property industry and most sales were done through sales seminars. As a result, some investors have found it difficult to get information on their properties, some of which have stalled.
About 200 investors, who estimate that they have lost €20 million on Dubai properties they bought off the plans from the now-defunct Larionovo property firm, have formed the Dubai Action Group to pursue their money.
Tony Hynes, chairman of the group, said he expected to recruit hundreds more members who had bought off-plan apartments that had never been completed by developers.
‘‘In many cases, investors believe the developer’s explanation of the delay in construction, and are unaware of the crisis in Dubai and the construction difficulties," he said.
Like many others in the group, Hynes invested €200,000 in the Sports City development marketed by Larionovo.
He paid 65 per cent of the total price of the residential units, but discovered that construction had stopped when he visited the site.
The Dubai Action Group has appointed Dublin legal firm Anthony Joyce & Co to begin litigation on behalf of the purchasers to retrieve their deposits.
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