Who do you blame for the Dubai property downturn?

[financier888]

Unfortunatley, bubbles in markets and greed are far from a new phenomenon.

Look at the internet in the nineties or even tulip bulbs hundreds of years ago. When a hugh bull run starts, people take leave of their senses!

Yes, I know of the tulip case but the dot.com boom was unbelievable.. I was in that industy in Asia at the time... this however, is on such a grand global scale brought to you by the most presitigious names in investment banking !

 

[markgoodwin]

I know, it beggars belief!

Cast your mind back to the Soc Gen scandal with that trader they made a scapegoat of Jerome Kerival(can´t remember how to spell his surname). The scandals that are appearing now make $5 billion losses like a walk in the park.

Some of these debt instruments being traded were that complicated we will still be seeing fallout over the next 5 years and who knows what the real losses are?

 

[Nicholas Wallwork]

I find it interesting that nobody has voted for "International Property Investors" in the poll when this area of the investment world had a substantial part to play in pushing prices higher and higher.

Is the Dubai debacle not a wake up call for those international property investors who tend to follow the crowd?

The clever money was probably in and out of Dubai by the time the top of the market arrived, leaving the secondary buyers to pick up the peices.

 

[financier888]

I know, it beggars belief!

Cast your mind back to the Soc Gen scandal with that trader they made a scapegoat of Jerome Kerival(can´t remember how to spell his surname). The scandals that are appearing now make $5 billion losses like a walk in the park.

Some of these debt instruments being traded were that complicated we will still be seeing fallout over the next 5 years and who knows what the real losses are?

What really gets me - is that the traders flogging these instruments didn't understand them NOR the insitutions buying them!!!! Someone from wall street sent me a paper written by the guy that wrote Liars Poker - mind boggling.. It will be a long time before Wall St will be trusted again. Another paradigm will emerge from this - a different currency base away from the USA dollar - AFTER 2011 when the T Bills mature... The European central banks are hatching a plan..

 

[financier888]

I find it interesting that nobody has voted for "International Property Investors" in the poll when this area of the investment world had a substantial part to play in pushing prices higher and higher.

Is the Dubai debacle not a wake up call for those international property investors who tend to follow the crowd?

The clever money was probably in and out of Dubai by the time the top of the market arrived, leaving the secondary buyers to pick up the peices.

You should have had an idea around June - but after the success of Cityscape Abu Dhabi - many felt 'NO! Dubai won't be effected" I heard this so often. They didn't feel the recession in the USA would have an impact. What was amazing was how it shut down virtually overnight. It didnt slow down - it went to virtually ZERO... No one could have predicted that, maybe except Nostradamus...

 

[financier888]

IS the worst yet to come?

"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed

Posted Feb 17, 2009 12:53pm EST by Aaron Task in Investing, Recession
Related: WMT, WFMI, FDO, ^GSPC, ^DJI, RTH, TGT

There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.
But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:
• An $8 trillion negative wealth effect from declining home values.
• A $10 trillion negative wealth effect from weakened capital markets.
• A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."
"The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," Davidowitz says. "A lot of that is gone."
Going forward, the veteran retail industry consultant foresees higher savings rate and people trading down in both the goods and services they buy - as well as their aspirations.
The end of rampant consumerism is ultimately a good thing, he says, but the unraveling of an economy built on debt-fueled spending will be painful for years to come.

"Worst Is Yet to Come" Americans' Standard of Living Permanently Changed: Tech Ticker, Yahoo! Finance

 

[DelboyG]

Self infected pain

The UAE may bail out their own citizen defaults, but they will put expats behind bars. What a mess!

Who saw the article recently about the number of high end cars being left by ex-pats at the airport with the keys left in the ignition, because they had to bail out of Dubai or face jail for loan defaults?

The whole world partied for 10 years with cheap, frivolous credit. The hangover is here and its a lot worse than many expected!

If you take a look at the realities on the ground, this market was never ever meant to happen, I refuse to blame the global credit crunch when 60% of the Dubai population was not in a position to buy even at 2002 prices and had zero incentive to even try to get on the property ladder given the visa restrictions and 30 day exit rules.

We here have had people buying units, multiple units, floors and even buildings when they only had 10-30% of the total price, yes there are people who have founding to the end, but the prices were pushed ever higher & higher by many who did not have that funding available! This crash was bound to happen 'global credit crisis' or not.

To build a sustainable property market you have to get the residents on board, you have to give them a feeling of belonging to the place where they are committing to a 10, 20, 25 year mortgage, it's impossible to get that commitment if you tell people that upon loosing their jobs, that they have 30 days to find the nearest airport.

If that end user commitment is not there, then you are building a rental property market that is at the mercy of oil prices, business sentiments and the need for users to minimize their expenditure. The Dubai government have said as much when they said that you as an investor could get a 'visit visa' to check on your investments. Now there is news being floated about a '6 month renewable residence visa' but that still won't cut it against a 20-25 year mortgage.

I'm not speaking about the world property markets now, I know, the UK and the US markets will pick up again eventually, but Dubai, Abu Dhabi and the rest of the UAE will not pick up until they understand that the markets have to address the end users, cutting them out of the equation will just mean a lot of empty buildings and falling prices, both to buy and rent. The people who invested as a 'safe haven' may well find themselves in the worst place on earth, loosing principle capitol as well as any future earning potential, due to law changes and wayward 'developers' who also don't have the funds to complete and have already spend the investor deposits or run away.

 

[financier888]

If you take a look at the realities on the ground, this market was never ever meant to happen, I refuse to blame the global credit crunch when 60% of the Dubai population was not in a position to buy even at 2002 prices and had zero incentive to even try to get on the property ladder given the visa restrictions and 30 day exit rules.

We here have had people buying units, multiple units, floors and even buildings when they only had 10-30% of the total price, yes there are people who have founding to the end, but the prices were pushed ever higher & higher by many who did not have that funding available! This crash was bound to happen 'global credit crisis' or not.

To build a sustainable property market you have to get the residents on board, you have to give them a feeling of belonging to the place where they are committing to a 10, 20, 25 year mortgage, it's impossible to get that commitment if you tell people that upon loosing their jobs, that they have 30 days to find the nearest airport.

If that end user commitment is not there, then you are building a rental property market that is at the mercy of oil prices, business sentiments and the need for users to minimize their expenditure. The Dubai government have said as much when they said that you as an investor could get a 'visit visa' to check on your investments. Now there is news being floated about a '6 month renewable residence visa' but that still won't cut it against a 20-25 year mortgage.

I'm not speaking about the world property markets now, I know, the UK and the US markets will pick up again eventually, but Dubai, Abu Dhabi and the rest of the UAE will not pick up until they understand that the markets have to address the end users, cutting them out of the equation will just mean a lot of empty buildings and falling prices, both to buy and rent. The people who invested as a 'safe haven' may well find themselves in the worst place on earth, loosing principle capitol as well as any future earning potential, due to law changes and wayward 'developers' who also don't have the funds to complete and have already spend the investor deposits or run away.

I agree with you - the govt was complaining about 'speculators' (including that ridiculous report by Stan Chart that wanted to 'tax' speculators!) Well, they got what they wished for - and ? - No market - for many of the reasons you quoted.. Who working here could acutally afford these prices and raise a family etc? I had freinds sell their place for a profit and then had to rent because they couldn't afford a new place. (unless they started in the 'off-plan' mode.. ) which still didn't solve their immediate problem - a place to buy and live in. (and IC wasnt an option..)

When I read about this 'new' six month visa... ?? This is hardly a solution - especailly if you have a family with children in school.... They supposed to go to school for six months or was this another scheme to extract more fee's for govt admin? We all know what a debacle the the EIDC is - and how it was impossible to meet the deadline... I can only imagine what you'd have to go through getting a new visa every six months... A policy that will NOT encourage 'long term' users..

Maybe after 6-9 months of NO sales - with more people leaving and prices dropping further, compounded by tens of thousands of vacant units - a new program will emerge.. These ad hoc solutions are not the answer..

 

[PropGuy]

^^^ Good points, that govt needs to take into consideration. Another thing, before great depression, in the bubble of 1929 US govt was blaming speculators and assumed crash of real estate and stock market in 1929 was healthy correction until they realized they made a mistake but then it was too late. US stock and real estate market did not recover until 30 years.

 

[financier888]

^^^ Good points, that govt needs to take into consideration. Another thing, before great depression, in the bubble of 1929 US govt was blaming speculators and assumed crash of real estate and stock market in 1929 was healthy correction until they realized they made a mistake but then it was too late. US stock and real estate market did not recover until 30 years.

WWII may have had something to do with the slight delay in real estate price recovery - especially in europe.. We also have more than twice the population now and climbing by the minute... let's hope this is 3 years here...!

 

[cookieboy]

As the Dubai property market continues to slide it would appear that many different parties are potentially to blame, but "Who do you blame for the Dubai property downturn?"

Have your say on the thread and in the above poll.

I blame the avalanche of hype that surrounded dubai - but this was something that was perpetuated by a great mix of individuals, companies and governments

 

[markgoodwin]

Emaar Share Price Surges

Many Dubai stocks surged this morning, including EMAAR, as news of the UAE providing some funding to assist Ducais troubled economy.

I can´t help feeling this is just a knee jerk reaction to good news and given the severity of the overall problem that market optimism will soon evaporate.

 

[PropGuy]

WWII may have had something to do with the slight delay in real estate price recovery - especially in europe.. We also have more than twice the population now and climbing by the minute... let's hope this is 3 years here...!

Well, Japan is still not recovered from 1990s crash but the main differences is that most real estate was finished in 1929 and 1990 for these to economies. But for UAE most is not even 10% complete and building materials costs have gone down 70%. So that is something that is favorable to UAE real estate market.

 

[sasherwani2]

Well, Japan is still not recovered from 1990s crash but the main differences is that most real estate was finished in 1929 and 1990 for these to economies. But for UAE most is not even 10% complete and building materials costs have gone down 70%. So that is something that is favorable to UAE real estate market.

But isnt that a bad thing? UAE not being even 10% complete but the developers selling off the remaining 90% to investors, many MANY of whom dont intend to pay the next installments due to XYZ reasons!

 

[Nicholas Wallwork]

There is every chance that the short term bounce in Dubai stocks will see many investors take the opportunity to bailout of the property sector and possibly the region in the short to medium term.

 

[PropGuy]

But isnt that a bad thing? UAE not being even 10% complete but the developers selling off the remaining 90% to investors, many MANY of whom dont intend to pay the next installments due to XYZ reasons!

Technically, no, since they can bring down the price without hurting the consumers in the market. When crash happens when most real estate stock is complete then it is not possible to bring down the price without hurting the consumers and thus recession is prolonged. It takes time to unwind in completed real estate market.

But that depends on Mr. Ali Abbar, he is heading the task force that is suppose to take us out of the crises. I don't know who is advising him and what solution he is considering.

 

[zanis]

Salzman: From Dubai To Don't Buy

The writing is on the wall for Dubai Disneyland - there will be a long period of decline until such a time as the recession (Depression even?) abates.

Click here for more opinion

 

[PropGuy]

The writing is on the wall for Dubai Disneyland - there will be a long period of decline until such a time as the recession (Depression even?) abates.

Click here for more opinion

That article is not really negative on dubai.

 

[financier888]

Well, Japan is still not recovered from 1990s crash but the main differences is that most real estate was finished in 1929 and 1990 for these to economies. But for UAE most is not even 10% complete and building materials costs have gone down 70%. So that is something that is favorable to UAE real estate market.

I think we may be pleasantly surprised in a rebound in this market but of course, it won' t be next month... Let's hope by Oct we can see signs of a comeback.. You're right - the market is not severely overbuilt - and with many projects on hold or cancelled - prices can firm-up quicker - if only the visa was reasonable.. based on your investment level with a 5 year res.. like Singapore... let's see..

 

[zanis]

Hello PropGuy

Not all news about Dubai is bad The article is opinion. Lets hope Dubai recovers quickly.