By Beatrice Thomas
“It will fall, it will correct and this is something we should all expect to happen and I expect it to happen in the next 18 to 24 months"
The head of an Abu Dhabi real estate firm backed by the Mubadala Group has predicted Dubai’s property sector will hit another slump in 18 to 24 months, saying the change was inevitable in an emerging market.
Speaking on a debate panel on the first day of Cityscape Global, Faris Mansour, director of Mubadala Pramerica Real Estate Investors, which is 50:50 joint venture between the Abu Dhabi investment vehicle and Pramerica Real Estate Investors, said “there’s no reason why as an emerging market we should expect there to be 10-year real estate cycles”.
He said emerging markets, moved in short, sharp cycles, reflecting the movement of capital, as proven over the years around the world.
“We should expect that to happen here as well,” he said.
“And that’s not to say it will fall necessarily as it did before. But it will fall, it will correct and this is something we should all expect to happen and I expect it to happen in the next 18 to 24 months… as capital becomes more expensive globally.”
Mansour said real estate was linked closely to the pricing of capital, which had been at its cheapest rates for about 10 years globally.
“We expect that that will change at some point,” he said. “The massive use of capital at emerging markets will eventually raise the cost of capital over time. That cost of capital will have a direct effect on real estate.”
He said investment in the Dubai property market as a result of the Arab spring was also temporary. As seen previously, as soon as the issue of liquidity emerges, that capital would move on to other markets, he said.
Bahrain Bay CEO Robert Lee, who was speaking on the same panel debate, said higher property price increases were happening in markets such as Sydney, Hong Kong and Shanghai and Dubai was “benefiting from a global phenomenon”.
He said Dubai was entering a precipice where “the economics of reality and the prices don’t jive anymore”.
“This is where we are and I think in the next year or two we’ll see a definite correction in prices,” he said. “Real estate, with all due respect, is a cycle business.”
Miguel Guadalupe, chief operating officer at Pacific Ventures, which entered the Dubai market after 2008, said it was seeing end users rather than “flippers”.
He said feedback, including from other developers, was that they were not merely investors but families who wanted to live in Dubai.
Jammal Hammoud, CEO Milestone Capital US, said the price increases of the past 12 months were not sustainable and were the result of a “glitch” in supply over the past four years.
“For the past four years there has been no growth,” he said.
He also said geopolitical issues had seen investment in Dubai. “This is unsustainable; the situation here is going to change.”
However, Tariq Ramadan, chairman of the UAE’s Tharaa Holding, said he believed the property market was “definitely in recovery” with prices at 2007-2008 levels that “in my opinion are sustainable prices”.
“Everything is picking up in Dubai and that’s driving sustainable growth and demand,” he said.
He said he believed speculative buyers existed for about 10 projects under Damac and Emaar. This compared to 200 projects between 2006 and 2008 where speculators were very active.For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
No...He is jealous of Dubai's iconic development and growth....Get the next flight out of UAE...Compare the growth of Dubai to European/Western countries...Am I being sarcastic?
One of the most thought provoking and well thought out / reasoned arguments I have seen put forward yet. He is an intelligent gentleman.
Sounds like Sour grapes. Dubai's market is based on end users, and prices are still some way off 2008 levels, and that is why prices will keep rising for the next few years
Quite right, Supreme jealousy! Dubai buyers all want to live in their properties, even the unfinished ones and there is no speculation whatsoever. And of course 2008 levels were realistic and supported by fundamentals therefore we should reach and indeed surpass those soon.
1. Property prices continue to rise from here, as expo win is announced and pressure on housing (from rising population) keeps rents increasing.
2. Property prices end up at 2 or 3 times todays values and are out of whack with salaries and yield expectations. Basically are based on sentiment and no solid fundamentals
3. New projects start completing 12-24 months and pressure starts easing on housing - prices level out.
4. Something triggers a crash. Spike in cost of borrowing, or more dramatically something that causes a 'mass exodus'.
5. Crash halves property prices (bottom of cycle) but as they had inflated 2 - 3 times, the bottom is still be significantly higher then prices we have today.
Does anybody agree with this - sort of?
In June 2012 for the first time since the crash we bought something in Dubai.
The market was still dead in my view, or was just ever so slightly starting to pick up.
We are little more then a year on from this and we are being told we have peaked?
Surely we are still at the very beginning of an upward cycle?
I know he says there are shorter cycles for emerging markets, but I haven't even had time to finish my breakfast!
Among all the prediction, the one about â€œnext correctionâ€ would go wrong anyway. In the first crisis, we had cash buyers from Afghan, Egypt, Pakistan, Russia and Iraq ran through floodgate with their suitcases packed up.
Now, the channels are dry after that flood. Especially, after the aids were locked out, recovery would be nearly even utterly impossible.
Just reading these experts and all of the earlier one's who steered the likes of Lehmann's into oblivion makes me wonder how people can talk rubbish or be stupid enough to believe their own rubbish, these guys believe their home market experience is bound to replicate here whereas the fact remains that it is the Indian and Pakistani investor set who influences the Dubai realty market and trust me they care two hoots for these "experts"!
One really does not to be a genius to realize that anybody who bought last year when the confidence had not returned would make a windfall if the confidence returned and it did! And it would be stupid to expect to have the prices continue to rise at that level as that opportunity has passed however fundamentals will ensure a healthy ROI on Dubai realty for a long time.
Ha, the moment property prices start to rise again, the whole 'bubble' discussion starts again. As if we haven't had that pre 2008!! People said in 2006 it was a bubble... And yes, they were right... just the timing was a bit off!