Dubai property market - should you get out now or hold on to what you're got?

Posted Nov 17, 2008 @ 2:27 am, Viewed by 524 Visitors, Read 545 Times.

At the moment things are not looking up – the worldwide global crisis has been averted, only to metamorphose into the worldwide global downturn. The Euro zone is now in recession and China’s huge stimulus package seems to have dropped like the proverbial lead balloon. Even mighty GM isn’t immune – it’s had to ask for a USD 22 bn bailout with the veiled threat it’ll go under unless it gets that money. One BBC news commentator mentioned up to 2.5 million jobs could go if even one large US car maker goes bankrupt.

The global crunch seems to be hitting the UAE economy as well, with two reports in particular drawing our interest. Arabian Business are reporting that several large developers and real estate agencies in Dubai are firing personnel, and the Gulf News has reported that Emirates NBD (one of the largest banks in the UAE) has stopped lending to several of the largest real estate-related firms in the UAE. A recent survey by The Estate Agents Dubai, a new forum and website for real estate agents in Dubai, indicates that real estate agents in the Emirate are now feeling the crunch with over 50% reporting no sales at all in the last month.
 
The big question then is what will happen now? Should property owners try to get out of the market now before it tanks or hold on because the market will rebound? Read on to find our views:
 
As you can imagine there is a lot of argument on what’s going to happen in the short-medium term. The survey by The Estate Agents Dubai indicates the vast majority of Dubai’s real estate agents believe that the market will bounce back in 3-6 months.  This is balanced against current negative world events; the expected depth of the oncoming global recession, the expected regulations which will be imposed on the banking and finance industry, the lack of liquidity, and perhaps greatest of all the sheer lack of confidence in the global financial markets.
 
On the positive side of things we have the local conditions here in the UAE property market which are, to a certain degree, at odds with the global situation. The absurdly high oil price over the last few years has left the UAE Government flush with cash, a bonus they’ve been using to their benefit with continued infrastructure investment. Anyone who travels past the Arabian Ranches on a regular basis will testify to that. The Government has also pumped tens of billions of dollars in cash into the banking sector in a pre-emptive strike to ensure it does not suffer the same liquidity problems that have affected the global system. Finally, and perhaps most important, is the simple fact the real estate sector in the UAE, and specifically Dubai, cannot be allowed to fail. If the real estate sector did fail the results would be devastating for the country, and not just in a financial sense.
 
We believe the Dubai property market will start to pick up early in 2009. This opinion is based on a combination of factors; the survey from The Estate Agents Dubai, the anecdotal evidence we hear from the banks and Government departments we deal with and our own extensive experience of this market. The first thing we believe the Government needs to do is to pressure the banks to re-start mortgage lending again. Six months ago it was possible to get mortgages with LTV’s of up to 85% (higher in some cases). Now you’re lucky to get 60%, and in some cases banks have stopped processing mortgages completely for some market sectors. The Government needs to reverse this situation and ensure mortgages are available at realistic rates for individuals who can afford them. Sort that problem out and the Dubai real estate market will bounce back on its own.
 
Paul.

Paul is IT manager and webmaster for Estate Real Estate, a Dubai registered real estate agency.  In his spare time he runs the free MyDubaiCommunity website which helps with lost and found pets in the UAE.

  • Rate this Post!
  • Print

This Post Has No Comments.

REW Blogs User Stats
Currently Online Users: 0
Total Users: 2,389
Entries: 7,601
Unique Views: 6,440,700
Total Views: 6,778,143
Total Comments: 9,372
Total REW Points: 510
Elisor

Elisor Handle IT and webmaster tasks for Estate Real Estate, an estate agency in Dubai, UAE. Read More

Blog Tags
This User's Stats
Blog Entries: 4
Average Blog Rating: 0
Unique Views: 3,413
Total Views: 3,743
Comments Posted: 8
Comments Received: 15
REW Points: 0
REW Bloggers
REW Community
New Bloggers
Blog Features
Syndication