By Anil Bhoyrul
Whether it’s currencies, commodities or property, there are currently few opportunities for increasing your hard-earned wealth.
It’s that old problem, though one, to be honest, that I personally have never really had. What to do with all this money? All that hard-earned cash you have, which you want to not only keep safe but grow?
Unfortunately, the options, wherever you look in the world and in whatever sector, seem to be increasingly limited. Let’s start here in Dubai. The emirate’s prime property prices have dipped by 4.5 percent in the second quarter of 2015 compared to the year-earlier period as currency fluctuations have deterred wealthy Europeans from investing, according to the latest Knight Frank’s Prime Global Cities Index.
It revealed that prices of luxury real estate in the emirate also fell by 2.5 percent in the three months to June 30 and by more than 3 percent in the past six months.
Out of 35 real estate markets covered around the world, Dubai was one of the worst performing, ranked 30th, Knight Frank said.
Its report added: “With the dirham pegged to the US dollar, a strong currency is affecting Dubai’s luxury housing market leading to a 4.5 percent dip in prime prices in the year to June”.
This isn’t a rogue survey, with several others pointing the same way. Classifieds website Dubizzle suggests that even so-called hotspots like Dubai Marina saw prices decline by an average of 18 percent in the second quarter of 2015. That is a staggering amount by any measure.
I think we can all agree that house prices in Dubai are falling. You could argue this is a much-needed correction, and good for long-term market sustainability. But it also means that unless you are exceptionally brave or rich, this may not be the right time to jump into the Dubai property market. 2016 is a much better bet.
So, if not property, what about gold? The price nudged up 8 percent last week, but the $1,120 value is still 15 percent off last year. Silver, hovering around the $15 mark, is 24 percent off the 2014 figures and nearly 50 percent down on just three years ago. Again, if you are not very brave or very rich, forget it.
It’s the same for global markets. On Wednesday last week, China devalued the yuan for the second day running, sending stocks downwards across Europe and Asia. China’s growth rate is slowing, and that can only be bad news for the rest of the world.
The US saw better economic figures in July, but low inflation and stagnant wages leave its recovery on a knife’s edge. A rate hike in September could easily tip the country back into recession.
And then, of course, there is the euro. On the face of it, Greece is near agreement on a three-year bailout deal worth $86bn, which should stave off an exit from the single currency. But the new wave of austerity will only lead to a weaker economy. The single currency project is far from safe. If you converted your dirhams into euros a year ago, you would be sitting on a 20 percent loss today.
Euros, gold, silver, property… sadly all show considerable year-long declines. Some of the ingredients that led to the 2008 financial crisis are back on the table, and won’t take much stirring to be cooked again. Personally, I think that won’t happen, especially in places like the UAE where the fundamentals are strong, and long-term prospects (such as Expo 2020 and stable GDP growth) remain good.
But as for what to do with your cash right now? The answer seems to be, do nothing. Making nothing is not a bad result in the current global economic climate.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.
I do not agree on the opinion that the property market in the UAE will do better in 2016. Why should it? It will be still 4yrs from the big Expo and there will not be more people coming because 4 years is still 2 visa periods to go till the Expo starts. The Expo may give a little boost to the property market, but we shall consider that this boost will not happen in 2016 at all. It may start from second quarter 2017 when companies start to move into the UAE in order to attend the Expo preparations. Loads of new Hotel rooms will be ready and so will be new developments around Dubai. The entertainment industry may give a little boost to the economy as the completion date of some Parks are announced for 3rd quarter 2016, but this has also not much to do with the Property market. It will be much better from 2017 onwards, but not even 1st quarter. If you invest now, you get properties for a reasonable price and you should be willing to keep till 2017, from then prices will go up only.
Interesting analysis... I would recommend to put money into Indian markets. This is the time you get a high rupee for every dollar and the medium/longer term prospects of Indian market is solid... Then, in UAE property markets.. There are some very good sales in the form panic selling for distressed owners, especially in good locations.. provided you believe in UAE story...which in my opinion is intact despite little aberrations here or there...
The Expo is also grossly overrated as an economic stimulus. Can anyone even name where the last three Expos were held?
Exactly, you can't. Why? Because the Expo doesn't really matter and it doesn't drive economic growth. Anyone who honestly thinks hosting an Expo is somehow going to boost the real estate market clearly has no idea whatsoever about what drives property sales, or even people.
There is no-one on planet Earth thinking "Oh look, Dubai's hosting the Expo in 2020. Maybe we should move there" - and there certainly aren't thousands of people who all will urgently need more housing than Dubai already has in five years' time.
@Doug I cannot agree with you wrt Expo comments. If you go back to history, all major cities have gone through the stages of hosting Expos during various stages of their growth. That means, Dubai is not going to end by the time Expo completes, rather it is only another ladder in the development and maturity of UAE fully diversified market.. More growth and more opportunities will come post Expo.. Of course, there will be ups and downs, but those will be the pains of growing up.... One thing I agree, that there is five years to go and any sort of Expo related ramping up may start only from late 2017 or early 2018....
When are we going to move away from property as a supposed guaranteed short term investment that prices people out of the market who actually want to buy a property to live in?
People say the youth of today want things instantly and aren't willing to wait for them - that's exactly the same as investors here inflating false markets by thinking its their right to make a large return on everything they do.
You only get increasing prices in property markets when supply is outstripped by demand: not a situation that there is here now or will be in the future.
Its time for people to wake up and understand that the property market was false here due to the actions of the investors: properties are not worth the values placed on them by developers or investors here.
Its time to realise that the market has to correct further and for prices to drop to levels where normal people can afford to buy property to live in and not just flip for a quick buck at the expense of the end user
I would consider a mixture of cash and ETFs in developing markets like India and Pakistan. Pakistan in particular is got a lot of hedge funds and overseas investors excited due to the strengthening economic story (China Pak economic corridor and Iran Pak India pipeline).
The political and security situation is fast improving and the stock market is one of the best performing in the world over the last couple of years.
@Doug, you may be right if you just consider the Expo itself, but you shall not forget that it is bringing workforce along with it at least 2 years in advance, which means housing requirements will move up. Certainly some of these people who are coming just for one visa period are highly paid individuals who can look into property options while being here. The other factor is the new entertainment Parks plus the Expo which is giving the tourism surely a boost. The Expo itself isn't good enough, but what is coming along with it and the current and future city set up could allow the assumption that the prices are going up. That you believe that :"Anyone who honestly thinks hosting an Expo is somehow going to boost the real estate market clearly has no idea whatsoever about what drives property sales, or even people" is just showing your arrogance and your incompetence to see the bigger picture.
But they haven't. Can you name any meaningful improvements that have happened in Hannover (Expo 2000) or Yeosu (Expo 2012)? I bet most people couldn't even point to any of these cities on a map. Did Spokane become a cultural and commercial powerhouse after 1974? How many people here even know that there is actually an Expo taking place right now in Milan?
Again, the idea that the Expo is going to help turn Dubai into some highly sought-after place to live any more than it already is, is utter nonsense. The only meaningful impact it's going to have is that it gives an internationally visible deadline to get things done, which may then 'encourage' actually finishing some projects. Dubailand was supposed to open in 2010. Where is it? Will it be here in time for the Expo? What happened to Restless Planet? How much could DXB have earned through tourism if that had been finished in time for the release of the movie Jurassic World?
Tell you what Ulevpri, can you point to any tangible benefits enjoyed by Yeosu, Hannover, Aichi or Zaragoza as a result of hosting the Expo? My problem is I am seeing the bigger picture - and there's nothing there. Are there loads of tourists heading to Milan right now?
Honestly, Expos are a bit of a white elephant that only appeal to countries that feel a bit insecure about their place in the world. I'm also not convinced that there will be loads of entertainment parks built in time - Dubailand is already five years overdue with nothing to show for it apart from Global Village, and this was supposed to be the big flagship project for Dubai. 1000 Dhs says that you'll get one theme park, max, in time for the Expo and it won't be a major one either.
Correct Bob, I agree totally. Only when the true 'populous' of Dubai can afford to buy property here will we see a 'stable & maturing' market. To me, its as simple as that.