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Just got the news straight from a top local friend.. the real estate market here is starting to crash.. shares are sliding like mad, and the main Saudi and Kuwaiti investors are now pulling out of here (mass selling) and diverting funds back to their home country real estate projects.

So seems like the prediction of an early 2007 crash looks to materialize. Property is too overvalued anyway.

Balancing is currently taking place in the Stock Market, its no secret.


But the question is.... Will this affect the rental prices?? and if it will.... When this will take place? i think there is some kind of lag.

i don't think this should be the biggest of surprises the market has dropped over 30% and has been a shorter's dream since late last year (not that i would short as it is Haram) Stock markets are always a pre-cursor to the rest of the economy, real estate i think will start turning by mid to late next year.

Yshimy already many lanlords have started accepting 4 or more payments for rent now which is a sign of desperation, the next logical step would be to lower prices but you never know. I hope they do.

Whatever happens the next few months will be interesting.

My predication is on target then.

In a traditional economy similar to UK and now Duibai, share values have a knock on effect to the property market, but... there have been exceptions to the rule.

But dont worry too much about a crash. Prices are so currently over-inflated the term "crash" in dubai will merely mean an adjustment back towards the true value, sadly for those who got on the bandwagon within the last 12 months, it will mean losses.

Rental prices will drop in line with supply and demand.

arniegang wrote:share values have a knock on effect to the property market, but... there have been exceptions to the rule.

.

sorry you need to dumb this down for me, what does have a knock on effect mean?

Fayz, you're in the financial game! Its like a domino effect.

sorry Faz

"knock on" or "knock on effect" is a brit term for the part of a sequence or the start of a sequence. A bit like "the domino effect", You knock the first one over then the rest will fall.

SNAP XRW both posted 2.29

hehehe, sorry egg on my face the term just threw me, I thought arnie was disagreeing but turns out we're all on the same page

a bit lengthy, but hope you financial guys find this helpful

Big investors have been selling off their shares in the Dubai Financial Market. Ironically the company whose shares have been most heavily traded, Emaar Properties, could also be one of the biggest gainers if investors decide to move their cash into local real estate.
United Arab Emirates: Tuesday, February 14 - 2006 at 10:03
related stories

Despite concerns about future oversupply, there is a good argument that suggests this may indeed happen. For stock markets and real estate markets are inextricably linked. But the link is not necessarily the one you might expect, i.e. stocks crash and housing follows.

Observers of the British property market back in the late 1980s had a classic demonstration of the stock market to real estate connection. In 1987 on Black Monday the UK stock market crashed, with billions wiped off the value of UK plc. And yet house prices continued to rise until 1990 (admittedly then slumping by around 40% in the worst post-war recession).

Strangely in 1987 the idea that those ruined in the stock market would rush to sell off property to clear debts simply did not happen. Instead people seemed to value their property more highly and held on to it.


A clear pattern
What appears to happen, and there are countless examples from around the world that demonstrate the same pattern, is that investment flows switch dramatically from shares to property in search of returns. No matter that a stock market crash surely portends a fairly serious business downturn that will also damage real estate - this is perhaps a little too subtle for the animal forces that move markets.

So now that we appear to be witnessing a serious correction in the Dubai Financial Market, with shares down 35% since their peak last November, will the smart money move into property and push prices higher?

In Abu Dhabi the rush to buy last weekend at the opening of sales at Aldar Properties high-rise towers suggests that this trend may already be evident. Are the thousands pursuing the newest off-plan buying opportunity investors who have just sold their UAE shares?

Maybe not, but they could well be the investors who might have bought UAE stocks if the market was still going up, and will buy apartments instead. The Abu Dhabi Securities Market, for the record, is 29% off its peak last May.


Abu Dhabi property
They may, of course, be joined by Dubai investors who think the Abu Dhabi property cycle will be similar to the one they have enjoyed in Dubai, and want to be in on the start of the next big thing. But what about Dubai property, will it benefit from the exit of funds from the local bourse?

The liquidity and investment model is surely the same as that seen in other similar situations in the past. There is also the fact that by global standards Dubai property is cheap both in terms of absolute price and expected rental yields.

And the UAE economy is also supported by high oil revenues and a new reforming cabinet has just been installed. So don't write the obituary of Dubai property just yet.

Hey arnigang ,

any information about Copenhagen, Denmark ? Now a days i am searching for house and planning to buy my own What do u think ? Bubble will appear soon? I am tired of search , cant figure it out anything

I am asking u because u r considered as Donald trump of Dubaiforum.

Ok first of all, I think we are all agree that Dubai stock market isn’t efficient. I never noticed a reflection between any announcement by any company and its stock price. Emmar has just announced huge revenue few weeks ago but its stock price declined. I really agree with arniegang about the stock markets and real estate markets relationship. I don’t think they follow each other and the black Monday is really a great example. In my opinion the relationship between stock markets and real estate markets is controversial. The stock market will be more risky in the most case compared to the real estate market. Investors who will withdraw there money from the stock market would invest it in lower risk investment, higher return & with expectation of appreciation. This will cause an increase in demand for real estate and an increase in its price as well.

By the way I’m a new member. This is my first post.

Good post and welcome Comrade

The problem with dubai in terms of stocks and shares in my humble opinion is lack of expertise by both investors and the maket itself.

Whereas in the UK we have much expertise in this area. People like myself lost £000's in the 80's, we all got our fingers burnt and "learnt" from it. They always say the "lessons you learn best are the ones that cost you money".

This in turn has led to people like myself being more cautious in riskier and certainly new markets like Dubai.

I know there are now the new wave of wannabe investors out there in dubai with all their deposits on properties still due to complete 2007/8. I have a sneaky suspicion there are gonna be some serious casualties, because of :

a/ their inexperience

b/ their bad timing

If the market does crash and all the indicators are that it will ( or at least readjust), all those wannabe property investors are going to end up in either:

a/ negative equity or

b/ will loose or forfeit their deposits

The wise ones like me bought at the outset before all the hype. The worst case scenareo i could ever achieve is "break even", although this is unlikely considering in 2002 they were almost giving away properties.

I can't wait for a "down turn" in the market, the wise ones will once again make a killing at others expense.

I know this sounds harsh but thats business at the end of the day. To an extent it is always a gamble, and if people want to gamble and play the markets, then winge about it, they should not have gone there in the first place.

I really agree with the fact of wanabe investors’ existence in Dubai stock market. It just remind me of the dot com crash in NY, Where all these rich baby investors were driving there Ferraris around Manhattan, trying to show off as they will inherit Bill Gate. You can see the same thing here in Dubai. All these blinded investors from everywhere pumping there money in the market hoping for greater profit in the shortest time. Most of them don’t know what is going on. They heard that there is a guaranteed profit and so they wana take the chance. The Dot com market is back to its basics now. In my opinion the stock market here in dubai is going to its basics too. I’m sure that will result a high cost for most of the investors but as u said “lessons you learn best are the ones that cost you money”. Hope that lesson won’t be the last lesson because many wont be able to get on there feet again.

COMRADE wrote:I really agree with the fact of wanabe investors’ existence in Dubai stock market. It just remind me of the dot com crash in NY, Where all these rich baby investors were driving there Ferraris around Manhattan, trying to show off as they will inherit Bill Gate. You can see the same thing here in Dubai. All these blinded investors from everywhere pumping there money in the market hoping for greater profit in the shortest time. Most of them don’t know what is going on. They heard that there is a guaranteed profit and so they wana take the chance. The Dot com market is back to its basics now. In my opinion the stock market here in dubai is going to its basics too. I’m sure that will result a high cost for most of the investors but as u said “lessons you learn best are the ones that cost you money”. Hope that lesson won’t be the last lesson because many wont be able to get on there feet again.

Exactly , dubai is still very new and at inception stage and those ppl who did their homework and are smart will make monnie.

One very important thing to highlight is the housing market is being fueled by a lot of that same “in-experienced” money, the stock market world over is riskier than real-estate but I would disagree with anyone that thinks over the next 2 years the housing prices will not ‘correct’ in Dubai.

Also specific to the comment about Emaar and it’s huge profits, 1 thing to remember is that as a general rule anything makes it to the newspapers it is already built into the market. You have to remember people who bought emaar 2 years ago the real cost was AED 2 which means a growth of aprox 1500% to its peak in November. Unless someone is mentioning an uber massive increase it is already well factored in.

This is not to say money can’t be made, I’ve fortunately had a very profitable 3 days (made 17%) but you need to understand the risk and be able to move in and out very quick.

Just some food for thought….

Wise words Fayz

Crash, what crash?? Where, when??

I'm house hunting this week.. so I'll let you know if I finding any house crashes..

Fingers crossed, I'll see if I can negotiate prices down based on the crash happening...

Cheers,
Shafique

you'll be lucky Shaf , not at the moment you wont

I'll lend you my crystal ball

How is house hunting going, you got mrs shaf out every day looking?

Have you seen anything yet?

Arnie - our estate agent is busier than a bee that is busy... will be going out to see properties tomorrow afternoon now - looking more and more likely that we'll go for a 3 bed + s/q in Arabian Ranches, seems the best compromise in terms of price and location, and my wife does drive so hopefully won't feel too isolated.. but with a 2yr old and a new-born (from May), she will be a little house-bound where ever we are.

AR seems well placed for the schools we are considering..

will updated tomorrow/weds after seeing the properties.

Oh well - shame that rents haven't started falling yet.

Cheers,
Shafique

mate

A/R's is well outa town. Nipping out, even with a car will involve a fair old drive.

Shafique, Good luck.

AR is good, if you workin Jabal Ali, but take care as there was alot of problems there during the rain.

Check also Merdiff, very good prices, very nice place.

Good luck man

I really wish that the rent wont fall, especially, at
this period, in fact I have no doubt about that. I don’t think that the price of the real estate will fall down neither the rents. I believe, in the worst scenario, it will be constant for the coming 10 years.

The real estate market really started in the 1990, when President Saddam Hussein invalided Kuwait and many Kuwaiti people moved to UAE. They transferred a lot of cash to the UAE market. They started looking for real estates. And even after liberation of Kuwait, many Kuwaiti people kept there estates as a future security. Others found the UAE a fertile market specially the real estate market.

In 1997, when Hong Kong became a part of China, many business men from Hong Kong transferred there money to other safer countries. They were scared of the communist system that china may impose on Hong Kong. Malaysia was the perfect market for them. That was the reason behind the boom in the real estate market in Malaysia. UAE market was the second choice for many business men from Hong Kong. That really affected the market in UAE. Finally after the invasion of Iraq by U.S, a huge amount of money have been transferred to Jordan first then to Dubai.

Business men usually look for safe markets not in term of market risk because that risk is the key behind profit and return but in tem of politic risks which they can’t manage. Dubai created the condition of low politic risk for investors, reduced the government barriers for entrance to the market and offered the support to any successful investor with a vision. So with all these money hunters from every where, no wonder if u see non-logical things taking place in Dubai market. it will take some time to settle down and sift the wana-bes.

Comrade, where does your info regarding HK funds being invested into Malaysia in 1997 derive from?

You are absolutely right; there are no evidences about the fund transferee from HK to Malaysia. I guess I have to have my lunch . Sorry things mixed up in my mind. I was thinking of the multi-millionaire Jew investor in Malaysia while I was writing, don't know how I thought that he was from HK. Things were mixed up in my mind. But don’t you think that it make sense the agreement between china and Hk take place in 1997. then the real estate goes down by more than 50% in HK. Then the huge growth in Malaysia take place in 1998? anyway do you agree that the (SAR) agreement had an influence on the other markets like Dubai.

So what to do then - I'm moving to Dubai within the next few weeks, and was looking at buying a Villa in the Meadows. I recently spent a few days in Dubai on a recce, and figured that was probably the best area, until I got onto this site today and read about the "highway" going through that area - the Ranches seemed nice, but still like living on a building site...

Please offer some advice for a newbie Rent or buy - Meadows or Ranches...

Well Comrade, I guess only time will tell but my money is on the prices dropping.

For GDZ i guess you need to factor in how long you'll be here, will your company housing allowance pay off your mortgage, how valuable the residency visa that comes with the house is to you, what build quality is like, etc along with the expected future value.

Good luck in whatever you decide and welcome to the forums

There are many reasons for the market crashing in Dubai. What's odd is how much restriction there is in the papers for freedom of speech. The market tumbles or crashes and nothing gets reported in the paper but maybe a small article mentioning that the Market corrected.. what a Laugh. The Market was down on profit taking, what a laugh... The Market was down due to new IPO releases, what a laugh.. What idiot falls for these lies? IPO'S are usually left only for local investors, are locals that poor these days? If one watched the shares being sold in quantities of 100,000 share to 300,000 shares of Either Amlak or Emaar to believe that one sold those shares to enlist in a new IPO is a joke. New IPO'S only give out about 500 to 2000 shares per investor if you are lucky. If one got a miracle he would get 5000 shares so there is no need for anyone to put in more then 10,000 Dh,s as each share is listed at 1 Dhm. per share. Selling say 100,000 shares of Emaar at 20 Dhms a share gives one 2,000,000 Dhms. one does not need 2,000,000 Dhms. to enlist in a new IPO. Profit taking?? Market has been going down forever now. When the Market climbs a few points it makes headlines in the local papers and press but when it comes crashing down like this there is no word from any local government official yet when there is a trade show at the trade center you see his royal highness cutting the ribbon with a big smile. Market comes tumbling down over 40% with investors losing billions of dollars and the ribbon cutting highness is off into silence. The Saudi Stock can come down 5,000 or 10,000 points and that can be called a correction but the local index at 1,200 points was nothing to be really proud of. The index erased a whole years gains within a month or twos time recently, so were there any gains last year that were solid then? I don't think so..
Saudi Arabia has a population which out numbers that of the Emirates by many times and the government has plenty of money to bring the local bourse back up in a heartbeat where Dubai in reality is poor. Roughly30 listed stocks that the government can't afford to keep stable. Saudi Arabia put measures in last week to limit the impact on investors in the event of a crash to allow the market to drop by 5% and 5% is on a 20,000 Point index not a 800 point index like in Dubai with no limit down. The Emirates needs more people to be able to support its economy and people with proper income , not Filipinas, Indians, Pakistanians and other $300 a month salary people. They have homes selling for $300,000 and up. Who is going to live in them? Are there jobs to here in Dubai to support people to live in those apartments or Villas? Look at the Job section in the Gulf News or other papers? Do you see as many jobb offers with high paying salaries as you see apartments and villas popping up? I don't think so, that means property crash around the corner. Are they luring in foreigners to invest in Dubai? Why are all the new IPO'S only available to locals then? Why are all the companies that payed high dividends where they rewarded share holders with shares only available to locals?This stock market can only go down with negative prospects like this. Will foreign investors put their money into a stock market like this again?? Two important things contribute to a good local strong economy and that is people and people with money. Dubai does not have these two things at the moment. While the government has some money it means nothing to the people who are living in Dubai as they have to pay for things and not the government.

But will it make rent less expensive?