Cracks are starting to show in Dubai's well-crafted and glitzy property-marketing machine. Flipping properties has reached such a feverish pace, driving up prices, that Dubai's Real Estate Regulatory Authority is looking at measures to crack down on the practice, which involves quickly reselling property at a profit. Meantime, a series of legal tussles and property-related scandals have rocked investor confidence, and analysts are forecasting that property prices, which have risen sharply in a matter of months, could tumble by as much as 10 percent, hurt by oversupply. "Many challenges have begun to surface, mainly the prospect of oversupply," said
Bashar Al Natour, a Dubai-based analyst at ratings company Fitch Ratings.
Tuesday, August 26, 2008
Dubai Bubble?
An article, originally from the Wall Street Journal and re-posted here takes a look at Dubai's "hot market" in real estate, fears of speculation, and attempts to put a brake on the speculators who are "flipping" properties there. The intense speculation has led not only to quick rises in real estate prices, but may have also enticed developers to create a supply in excess of demand. After visiting the place several times, I refuse to believe that the current level of building in Dubai has already outstripped long-term demand in many areas. I just don't think Dubai will draw the people that speculators are betting on. I think many are in for quite a surprise there. The glittering veneer is already beginning to look a bit faded and worn, so to speak. From the article:
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2 comments:
During the earlier years of development of the UAE the government of both Abu Dhabi and Dubai have frequently had periods when relatively large numbers of lettable properties were empty (both their own and private landlords) . However as the market then was internal (simply letting properties to the local population and expat workers “residents”) it was small in scale and manageable. For the last X years, the property market has evolved into selling to non-residents with a focus on the UK, India and adjacent GCC states (with perhaps some Russian, Pakistani etc).
Throw into the mix – the dramatic increase in the scale of the UAE property market, fluctuation stock markets, plateauing of oil prices, the collapse of the UK internal housing market (which had been used as source of finance), , the absence of ‘freehold’ as understood in the UK and the recent explanation that there are no automatic residency rights and it now is not managed quite as readily.
In turn, the UAE property companies (and others) have a case of current oversupply and current over-extended development programs (often into neighboring countries the majority of whose local populations can never afford such properties) . Throw into that mix rising competition into the property market from other ‘hot climates’ like Brazil and East Asia and it’s clear that a bumpy ride is ahead not only in the UAE but similar places.
My translation of your comments: UAE is in for a complete f-ing real estate mess.
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