20 June, 2010

Credit Notes

Nakheel Credit Notes are being traded again at the Nakheel head office. They were suspended for a while and we believe they have re started to allow people to consolidate their credit into different projects as of last week.

The credit notes have been trading ever since the Credit Crunch hit Dubai in October 2008. All the major developers have been allowing people to trade out of stalled projects into other stock.

It used to be that you could transfer your credit into any other property and even a property that was not in your name. Recently the Developers, and especially Nakheel, have only allowed people to transfer funds into a property they already own. This has slowed the consolidation market down considerably ,as it is effectively forcing people to buy another property ( and introduce more cash) before they can transfer their credit.

Some people are looking to buy credit from those people that have it and they are purchasing at a discounted rate in the region of 40%. The sellers of credit are obviously taking a huge hit on their ‘asset’ but after nearly two years of little improvement in the market, sellers have become pragmatic about the situation and many are deciding to cash in and place the reduced balance into other assets.

Throughout 2010 Credit Notes have been the mainstay of the Dubai property market with these transfers far outstripping legitimate house sales. In the short term this trend is likely to remain as people organize their portfolios the best way they can.