Boom time again for Dubai property?

Sunday, 13 March 2011 1:33 PM

Might it be time to consider buying Dubai property again? I only ask because the oil price, as I type, is $116 a barrel, and no one thinks that’s absurd. Certainly, it is unlikely to decline against a backdrop of the worst and most widespread unrest in the Middle East in living memory. The madness in Libya – which accounts for two percent of the world’s daily oil consumption – looks set to worsen considerably, and should unrest spread to Saudi Arabia then the common prediction is the oil price will go over $200, comfortably.

While a price that high would cause pain in economies outside the Middle East, it would mean the GCC countries were pulling more than $2bn a day from the ground. They are currently pulling well over a billion dollars a day from it. That money has to go somewhere – it will trickle down through the system and free up the wheels of commerce, encouraging banks to lend and see states, particularly stable ones, injecting massive investment into infrastructure projects.

It is well known the property market is oversupplied in Dubai – a situation the government has taken steps to address. And obviously individual investors overseas, particularly in the West, are not today so flush as they were during the decade-long property boom which culminated in 2007.

But set against that is the fact that Dubai’s image as a Middle East investment opportunity has been, if anything, burnished by recent events. Where today in the region is more attractive as a destination to park cash? Dubai, and the wider UAE, is stable. It is well regulated. And its infrastructure is built. Between $500m and $1bn a day was believed to have been flying out of Egypt during the worst of the upheaval. Similar amounts will also be exiting the other countries in which uprisings have occurred. It would be surprising if much of that cash didn’t wash up in the UAE.

UAE Economy Minister HE Sultan bin Saeed Al Mansouri in this week’s issue of Arabian Business says FDI in the UAE in 2010 was $70bn, and with the IMF predicting economic growth in 2011 of 3.2 percent - and everywhere else in the region suddenly looking a lot less attractive in the short term - who would bet against that figure increasing considerably this year?

Dubai’s economic problems were front page news around the world when they struck. But compared to what is happening across the Arab world today, doesn’t a request for a standstill on debt interest payments seem miniscule?

There are many, of course, who believe property prices in Dubai won’t pick up for between five years and a decade. But then, only three months ago, nobody could have told you Hosni Mubarak would be out of a job by mid-February. Someone’s got to call the bottom of the market soon. And be right.

******

A friend who works in Bahrain is looking for a job in either the UAE or Qatar. He keeps going for interviews and doing well, but being told to wait. His head hunter says he is no longer only competing against other candidates from the region, as he would have been only six months to a year ago, but rather he is competing with a massive wave of qualified financial sector workers looking to get out of the Western economies in which they work as quickly as possible, before the austerity measures kick in. A sign of the times. Gulf employers are now able to pick and choose like never before.

Damian Reilly is the Editor of Arabian Business. The opinions expressed are his own.

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Posted by: Linoy Joseph Monday, 21 March 2011 7:37 PM[UAE] - india

i support u AW
this cycles every 4-5 years. 1986 98 2004 2008 either dotcom or realestate greedy stage causes the burst, and definitely the market is waiting for the fear stage where things would be back to normal and people fear to invest due to the last stage.

Linoy

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Posted by: Robert Thursday, 17 March 2011 8:52 PM[UAE] - UAE

If Dubai is going to build their economy around the real estate sector like before, it's going to be a huge mistake. A strong real estate market should be the by-product of a strong economy not the other way round. Dubai's strength lies in trade and tourism which should be its main focus.

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Posted by: AW Thursday, 17 March 2011 2:27 PM[UAE] - UAE

In Dec 2008, a London-based property adviser took a full-page advertisement in Gulf News to make his case for Dubai property now representing a great opportunity for buyers. After that prices crashed more than 50%.

I wonder where this gentleman is now. Nevertheless there are enough people like him saying the same things like "bottomed out" / "boom time" / "right time" etc etc etc...

One investment theory suggests that all investment cycles are characterized by the "FEAR - GREED - HOPE" Cycle.
- Coz of Fear, you dont invest.
- Coz of Greed, you invest at probably the wrong time expecting significant returns.
- Coz of Hope, you probably keeping buying to average out cost or dont exit expecting that the market will turn around soon.

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Posted by: Saif Wednesday, 16 March 2011 6:26 PM[UAE] - United Arab Emirates

I have just invested in Burj Khalifa. 10 floors already booked.

News is in, Bahrainis and Omanis are flooding in - Invest in Property, right time.

Those who stay back, will go back

Posted by: jake Thursday, 17 March 2011 10:35 AM[UAE] - uae

the force is strong in this one

you must be the same joker who announced on the radio today that the property market is back and going for the next boom...money is in transit at best...europe is the only winner from all these unrests down here...

Posted by: John Smith Thursday, 17 March 2011 10:31 AM[UAE] - UAE

Regional unrest in which ever part of the GCC will do nothing but pile on the woe for Dubai.
Tourists will not come, investors will not come and rich locals will move to Europe.
The heavy handed respose in Bahrain will do nothing to help.

Posted by: Dan M Wednesday, 16 March 2011 8:47 PM[UAE] - Australia

Saif, I think you just bought the 10 floors I sold. Was hoping to find a mug ..

Thanks buddy !

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Posted by: PN Menon Wednesday, 16 March 2011 5:16 PM[UAE] - India, UAE

If Iran interferes in Bahrain - there will be no doubt that the GCC countries will engage in a conflict with Iran.
who knows, maybe we will find a lot of Iranian interest in Dubai property

Posted by: Marc Thursday, 17 March 2011 9:05 PM[UAE] - UAE

He was being sarcastic.

"Maybe we will find a lot of Iranian interest in Dubai property."

You know, like so much interest they invade and take it over?

Posted by: His Excellency Dr Paul Thursday, 17 March 2011 2:14 PM[UAE] - Dubai, UAE

Do you think if the country was at war with Iran, it is going to start letting in huge numbers of Iranians?

Do you think being at war with a neighbour and having civil unrest in next door neighbours is really conducive to improving the international perception of stability?

I think a lot of burned investors are grasping at straws here. All this war and conflict in the region is a BIG negative for the attractiveness of the middle east in general. Lots of Europeans are put off already - Prince Harry was due to come to Dubai a week or two ago but cancelled due to the security situation in the middle east. And he's been to war in Afghanistan!

People need to stop talking up war and start talking up peaceful transitions to democracy. It is peace and stability that will help the economy of the region, not war and crackdowns.

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