By Courtney Trenwith
Expats dabbling in the UAE stock exchanges and buying property have short memories, he says
UAE investors will never learn how to properly grasp the emirates’ financial and property markets because they don’t stay in the country long enough, the influential CEO of Daman Investments has said.
Shehab Gargash said the high number of expats dabbling in the UAE stock exchanges and buying property have short memories, making the markets more volatile.
“The UAE investor rotates a lot. Remember the vast majority are non-national ... therefore you’ve got a refreshment of your population every decade and therefore they will act in a manner of approaching the market for the first time ever,” Gargash said during an annual press briefing on Tuesday.
“So there are lessons to be learned but I’m afraid we are not going to learn them - not now and not ever.
“The market will be more volatile than usual because that’s the nature of the UAE market and, as such ... the successful investor in the UAE market is one who can read those patterns well.”
Gargash believes the UAE markets have returned to positive territory and the gains are only the beginning of a “multi-year bullish cycle”.
Daman Investments is predicting double digit growth in UAE financial markets this year, with both the Dubai Financial Market and Abu Dhabi Securities Exchange already surpassing their 2009 peaks.
Gargash said he was not surprised average Dubai property prices had increased by about 20 percent because they were coming off a significant fall. Some properties lost most than 60 percent during the bust.
“I think the reason we saw the fall in the stock market and also the real estate market is that they were pushed up to untenable levels,” he said.
“It’s a pendulum: whenever you stretch too far, you have to come back. If you stretch it extremely too far you will come back with a zoom.
“It is a feature of any cycle, anywhere in the world: investors will overreact, push the boundary too much, you will get a retraction, people will get burned and then it will start all over again. I don’t see anything wrong with that, it’s just a feature of the market.
“The UAE tends to be a little more ‘absolutest’ in the way it reacts – it is more extreme; when things are bad they’ll be extremely bad, when things are good they’re extremely good.”
In other comments, Gargash said banks had begun to lend again and their high liquidity was “extremely encouraging”.
“This will be a key driving factor for the return of activity in this sector and I think we’re going to see it ... with a positive vengeance,” he said.
Inflation also was steady. Daman Investments expects inflation to be 1-1.5 percent for 2013.For all the latest banking and finance 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.
The only reason why UAE's transient populations do not see its financial and real estate markets as long-term investment propositions is because they are not given permanent residence. It is unrealistic to expect people who live out of suitcases (even after 25 years) to call that place home. However, once that paradigm is changed, this market will bounce back to unprecedented peaks, and remain there.
So will Emmar and other unrealistic in the ocean land makers ever learn, they are so close to the rulers decision making and still they are the biggest risk takers. The rest of the world are just watching stunned.
I really appreciate Mr Gargash because he speaks truth and unfortunately we people never understand what he said in the past and also what he is trying to say now. Greed has destroyed families in Dubai. I hope people refresh their memories and hope we don't create the same situation that was created in the past...
Shehab Ghargash has hit the nail on the head. thousands of greedy investors have been ruined in the UAE because of the property bubble burst and the downfall of economy in UAE in the recent past. Property investment is always a big risk and the UAE govt should not allow any expat speculators to creat a bubble which will again burst. The property should be paid up 100% prior to registration in their name. The property investors should take a maintenance and facilities usage guarantee amount for a period of 10 to 20 years , so that they will not be fleeced in the future like what is happening now in Dubai etc.
1 = Property investment is actually viewed as a medium to low risk investment, and should never really fall into the high risk category.
2 = Do you think the Middle East investors buy property abroad for 100% money down, I dont think so... What about people who are buying a house for their family to live in? Honestly you havent given this any thought have you? Do you think everyone in Dubai has over 1million AED just sitting in their pockets?
Your "ideas" are the kind of ideas that make a small group of people extremely rich and a large group of people extremely poor... Sounds like greed to me???
To curb speculation, why not put a stamp duty or a tax regulation "rewarding" the ones investing on the long term basis, calling Dubai their home, to stay, live, and retire eventually in Dubai? While penalizing speculators, and setting more stringent rules on borrowing (a larger deposit). In Singapore, you need to put a 30% deposit to qualify for a loan. Tax relief should be provided though, to home owners (their residence) under specific conditions (moving away from Dubai, or documented medical conditions, un-employment). Expats from all walks of life dreamt of a borrowed future, of quick and large wins and ended in pain and tears, shattered! Too fast, to high! ...