Sasher,
I have to agree with the other guys....this is a very negative opinion and you are most welcome to express it....however, your sentiments are a dime a dozen and apart from the fact that the rest of the world is "falling apart", do you have any information that may substantiate your point of view. I say this , not to attack your POV, but rather so that you may present your arguments and we may debate the facts rather than fight over opinions......
I see several differences between Dubai and the rest of the world and this is what makes me bullish on the Dubai property market. The banks that reduce their LTV's are taking pro-active steps to protect themselves and ultimately this will help the property market. The banks reduce the LTV's because they are worried that their security(ie the property) will diminish in value. In fact, I am not even convinced that the LTV reduction represents a bank POV on the property market but more of a kneejerk reaction to the credit crisis. Nontheless, you don't need to be a rocket scientist to realise that there is some punishment coming to the market. My argument is that this going to be a healthy and moderate correction and will allow for savvy investors to make good deals before it continues its growth.
My next point is that in America, the crisis was caused by a sick property market(TOO much debt!). Imagine having a property mortgaged up to 125% LTV and mortgage rates that triple
Conversly Dubai has a healthy property market that is being affected by the current crisis. This is a big difference. Capital is fleeing Dubai because it is required elsewhere to stave off disaster, not because it is risky here. Give it a few months and when the dust settles, people will be wondering where to put their money. I wonder if it will be in the USA where they have yet to dish out one dollar of their $700 billion bailout package, or in the UAE where the government decisively and immediately injected liquidity into the market when required. Case in point is Gordon Brown here right now cap in hand seeking financial aid from the UAE.
One also needs to look at the fundamentals and that is rental demand. There is insufficient rental supply and given the current crisis with developments being cancelled, I doubt we will see and oversupply. This is over and above the governments' open statment that they will never allow supply to become excessive.
In short, I think the government may step on speculators(ironically the developers like Emaar and Nakheel are the BIGGEST speculators in the market),but if you focus on rental potential, you will not go wrong.
Any property investment is done in the hope of future profits in the form of either capital growth or income from rent. While there may be a slight correction to the capital value, Dubai is one of the best places on earth to be a landlord. Healthy yields(relative to cost of capital) combined with landlord friendly laws where the tenant pays you a year in advance and the worst thing he can do to you is renew after a year with a small increase. In my country, tenants have rights
this means it may take me up to 6 months to evict him if he decide not to pay his rent.....what about my rights???? My point here is that risk in property investment is about more than just capital values.
If you have bought with the hope of selling in the short term for a profit, well, thats called speculation and should come with a big risk warning!
Anyway.......just my take on the market.
regards
Kenny
