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Money managers under the microscope

Western investors fear Dubai’s Wild East reputation

July 27, 2009

By Jason Benham

Glitzy Dubai’s property market is in trouble, there’s no doubt about that. Just take a look at the hundreds of motionless cranes, unfinished projects and the expats who are leaving in droves as they lose their jobs.

Dubai's future cloudedAnd prices and rents which soared during a six-year boom have crashed since late last year. According to one resident who recently moved in the City, it now costs 150,000 dirhams to rent a three-bedroom flat on the Palm, a man-made island off the coast of the emirate, around the same it would have cost to rent a one-bedroom appartment there a year ago.

It’s not just the global downturn thats the concern for Dubai’s once-booming property market, but also the lack of transparency and need for greater regulation. And that’s what’s going to keep the western investor from splashing the cash.

Investors looking at Dubai’s real estate sector are a different breed. They are no longer looking to snap up properties in the hope of making a quick buck. They are more conservative with a longer term outlook.

“RERA (the Real Estate Regulatory Authority) has been trying to introduce regulation to minimise the impact of speculative investors,” said Andrew White, head of Middle East operations at UK-based investor Kenmore property Group.

“But some have said this is like shutting the stable door after the horse has bolted because the downturn has more or less wiped these out anyway.” So, a little too late perhaps ? And what about the recently announced planned merger of Emaar Properties, builder of the world’s tallest tower, with
three other local property firms?

Well, so far no one really knows. Simply put, there has been little in the way of information about this.

“If you look at Emaar and the potential merger, there is little financial clarity on how this will proceed and that is going to worry investors,” said Bobby Sarkar, analyst at Al Mal Capital. ”The U.S. and European markets have high levels of clarity in terms of regulation, but that isn’t the case here.”
 
There is no doubt however that the government is trying to improve regulation and transparency. Several wins for the property market over the last year include the introduction of a monthly rental index and new laws for property maintenance, not to forget the continuing effort to crack down on corruption.

But there is a long way to go and more is needed for Dubai to come close to rivalling mature markets such as the UK and U.S. which offer the longer-term investor the transparency they crave.

Comments

”The U.S. and European markets have high levels of clarity in terms of regulation, but that isn’t the case here.

Don’t forget lack of regulation was one of the reasons why investors wanted to invest in Dubai. Changing this could do more harm than good to the economy.

 

I agree with Nikkei 225. The lack of regulations is the one of the main reasons investors are still interested in Dubai.

Maybe creating a new opportunity and goals for profit in Dubai would gain investors interests again. rather than focusing on construction investments. I know its hard, but Dubai still has a unique image in front of the world. Using that, and focusing on it, could prove to be fruitful eventually.

P.S adding more regulation putting companies into panic and eventually terminating more employees could resolve into credit crisis for banks. which means making things worse. Its all a big reaction.

Posted by Ram Zalef | Report as abusive
 

What is Sinead Cruise talking about? lack of regulation was one of the main reason that financial crisis occured in USA and Europe.
Dubai have to tighten it’s laws in order to control this financial mess.

 

I can’t take credit for this blog Ann Julie, this piece was written by our Dubai real estate correspondent Jason Benham, perhaps he might like to respond?

Posted by Sinead Cruise | Report as abusive
 

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