Dubai dream over for western investors

May 18, 2009

Real estate prices are in freefall. Billions of dollars worth of projects have been cancelled or put on hold and expats are leaving in droves as they lose their jobs. Once a playground for the rich and super-rich, the seaside emirate — home to palm tree shaped islands, mega malls and luxury sky-rise hotels — has lost its lustre. And bargain-basement assets are not yet cheap enough to tempt buyers back. 

European investors, who once clamoured to Dubai, reckon they can land better deals closer to home or elsewhere in the Gulf. Some analysts are predicting that the more stable markets in Abu Dhabi, Doha and Saudi Arabia to recover faster than Dubai.

 “Dubai is not one for us. I prefer long-term established locations with underlying intrinsic attractions or clear, sustainable competitive advantages,” Bill Hughes, managing director, Legal & General Property, told Reuters.

True, Dubai offers guaranteed sunshine for almost 365 days of the year, tax-free salaries and arguably the most westernised lifestyle in the Gulf but the boom-bust characteristics of its real estate sector will likely deter many investors from taking the plunge.

From start-2007 to mid-2008, prices rallied almost 80 percent, Morgan Stanley estimates showed. But a UBS report last month said Dubai house prices could fall up to 70 percent from their fourth-quarter 2008 peak. A Reuters poll in March showed prices were likely to fall more than 40 percent in 2009 and 2010 before recovering in 2011.

 It could be some time before western investors are lured back to seek bargains in Dubai’s property sector, and even then, will the emirate’s sector ever reach the same dizzy heights again? –Jason Benham.

(Reuters photo: Steve Crisp)

9 comments

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Dubai will be fine, but things will not be the same as they have been for the past 10 years as there is more competition from Abu Dhabi and Qatar. That doesn’t change the fact that Dubai has a lot to offer, great life style, good infrastructure, excellent housing (now at bargain prices), no tax, cheap quality labour force, political stability and a pro-active government. No doubt that as soon as the economy starts to show signs of recovery Dubai will boom again.

Dubai is a great place to live!

“…the latest trends in property investments globally show that the tide of cross-border activity has turned, with buyers retreating to home countries and local markets to scout distressed opportunities in the downturn.

…real estate trading activity has achieved a stunning global uniformity with very similar patterns. Worldwide sales volume and the number of trades plummeted to one-sixth their levels of two years ago and fell 73 % from Q1 2008 to just $47 b and 1,014 properties in Q1 2009, according the latest Global Capital Trends report of Real Capital Analytics. The broad drop in activity cut across all property types and just about every market.”

Posted by From Dubai | Report as abusive

Why do you link Dubai’s ‘most westernized’ gulf state status to it being attractive to investors? Why would nonwestern investors care if it were westernized or not?

Quality always survives!

There is a lull in Dubai’s economy, but Dubai will be coming back even stronger after the recession is over.

I think Dubai will never be what it was in 2007-08. It will come back to its state of 1999-2000. It will still remain tourist hub, but less of business hub due to confidence damage what they have done. Property market will not come back beyond 2003 levels max. Alot has been damaged, more than what we know. Lifestyle, western trends, sunshine or tax free status doesn’t mean anything if base is not there. The base is trust. When trust flies away from a financial institution or a sovereign country, money flies out fast. Then it takes decades and radical changes to bring it back. These are my thoughts.

Posted by Brave Boy | Report as abusive

Dubai is the fine real estate market.But prices are too high and beyond the reach of the common man. Now prices have come down due to global recession.Of couurse,right time to invest.

Bargain basement prices!

50% reductions from the peak!

I don’t think so. Try talking to the agents and see if you can find something at a bargain basement price.Go and have a look at a 2 bed on The Springs in Dubai at Dhs 1.3 million and wonder why anyone in their right mind would pay even half that.

I have spent weeks trying to find something at just 10% below its original price, even though I am told it should be more like 60%. They don’t exist simple as that.One developer has even put their prices up 10% in the last week!

Posted by Kate | Report as abusive

[...] Dubai dream over for western investors [Reuters Blog] [...]

The prices are falling but still there is a lot optimism among middle east experts who think that Dubai real estate will bounce back.