Firstly, people talk about Dubai house prices, but they are not really the issue we are discussing here; the kinds of properties that Colliers international are issuing research reports on — the kind that have lost 48% of their value — are luxury, internationally marketed properties that people from around the world bought as second homes and investments, not 2 bed semi’s (semi-detached houses) that have ever been bought for the Smiths to live in.
Now, property prices and has the Dubai property market bottomed? I have been very negative about Dubai in the past but with prices now reported to have fallen 51% from their 2008 peak — to the point where we are literally back to square one — I am forced to say that prices may well have fallen as far as they are going to.
That said, I do not foresee a return to growth of any real magnitude anytime soon — if ever. Don’t get me wrong Dubai is a very popular tourism destination, famed for its prestigious sky-scraping and man-made-island resorts, but Dubai property prices grew rapidly in 2007 and 2008 based on foreign property investors buying and selling to foreign property investors. Many of those same investors got their fingers severely burnt when there were no more foreign investors to sell to, I doubt there will be many people queuing up to make the same mistake.
So, as I have said before, if the Dubai property market is to go anywhere in the future then it must reinvent itself to target a new breed of buyer; lifestyle buyers.
Of course all this is just my opinion, and there are plenty of people out there who have a completely different take on it. Like it or loathe it the Dubai property market is still one of the most talked about in the world; people really care about what is going on with prices for whatever reason that may be.
I have also heard reports of a miniature boom from American buyers in the country, but I have been unable to substantiate these reports as yet.
If from the ash-like sand Dubai can emerge as the place where today’s tourists become the holiday home buyers of tomorrow then maybe we will see some strong growth as prices find a balance from where more stable annual growth can be sustained.
In short: with all its fanfare and prestige it is entirely likely that Dubai will once again be a very desirable place to own property, but without lifestyle buyers to strengthen investor’s exit-strategy it is unlikely to ever be the hot-property investment spot it was last year.
With the recent imprisonment of the British property tycoons the market will continue to nose dive. The 50% fall in prices so far is the tip of the proverbial ice-berg. Lets face it, the property prices were never real in the first place and this was inherently understood by the guys pushing the concepts. Fortunately for those guys there were plenty of takers who could not read the signs and understand the concepts. I predict a few more imprisonments to come and that will cause a shudder or two which will itself self-replicate further downward price spirals. Escaping in a wet suit seems the only option for a few more of the not-so innocent guys.
Comment by Ben Bhoral — September 5, 2009 @ 3:18 pm