Are we nearing the top of the Dubai property market?
News that Dubai focused property developer Damac is looking to float on the London stock exchange has certainly got the property sector buzzing with excitement. Opinion at this moment in time seems to be split in relation to how difficult it may be to sell £313 million worth of global depositary receipts (with each global depositary receipt representing three ordinary shares) when you bear in mind the worldwide situation and the very differing opinions on the Dubai property market.
Historically many property companies have looked to carry out such transactions when they feel that the property markets in which they operate are perhaps nearing their short to medium-term high. Alternatively, a number of companies have looked for additional investment to expand their exposure to buoyant and vibrant markets such as Dubai.
More focus on the Dubai property market
As if the Dubai property market was not in the news enough of late, the proposed flotation by Damac on the London stock exchange has caught the attention of more property experts. Whether or not the company will be able to persuade investors there is more growth potential in the likes of Dubai, Qatar and Saudi Arabia remains to be seen as these are areas in which Damac operates.
There is a growing suspicion that the recent concerns about the buoyancy of the Dubai property market may well have their foundations back in 2008 when the market collapsed. Many investors, property developers and financiers lost a significant amount of money and perhaps they are becoming a little more edgy than they would normally be because of the history. It is also worth bearing in mind the relatively quick pickup in Dubai property prices as well as the fact that the vast majority of people living in the area are only there for work purposes.
Quote from PropertyForum.com : “Does the Dubai property market have a firm foundation or are we in danger of another boom and bust?”
Appetite for property
At this moment in time London, Dubai and a handful of other areas around the world including the likes of Australia are still attracting more than their fair share of property investors. There is every chance that the £300 million plus share issue by Damac will test the market and investor sentiment in the short to medium term.
On the upside, it is worth noting that Damac has a tremendous track record in area such as Dubai and indeed was one of the few to come through the 2008 property crash to fight another day. Some very well known property companies and property entrepreneurs fell by the wayside in the aftermath of the US mortgage crisis and this is something we should not forget. The company has also suggested that its limited focus on property investments at the moment could be expanded and indeed, assuming the company was able to find value, a significant investment in the London market could follow in the years to come.
Conclusion
The £313 million share issue by Damac has certainly caught the attention of property investors around the world and placed more focus upon the likes of Dubai. While some experts believe the company could find it difficult to raise such a large amount of money at this stage of the property cycle it is worth remembering that Damac as a very good track record having lived through a number of ups and downs in property markets around the world.
The news was not necessarily a surprise to many in the know and we should see an array of broker comments and research notes in the days and weeks ahead. This could be a very interesting time for the international property market.