Is Dubai a Better Play on Real Estate Recovery Than the U.K. or U.S.?

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Dubai property prices have slumped this autumn and villas that sold for AED13m in the spring have dropped by almost half of that. Luxury apartments are difficult to shift at any price while even affordable units are not easy to sell. Off-plan is as dead as a dodo.

Yet despite the sudden slump in the UAE housing market this autumn, with sales and selling prices sharply down, there is a much better argument to be made for buying at depressed prices here than in the UK or even the USA.

To start with the real estate price falls may already be fully priced into the market in the UAE, while prices are still heading down in the UK. It is a feature of emerging markets that price downturns are swift.

Slower falls

More mature markets seem to fall in slow motion as buyers are more reluctant to cut prices, and banks seem to have more patience with mortgage payers in trouble. Certainly negotiated prices for UAE distressed sales looking an interesting opportunity for cash rich buyers.

One London based property adviser, Mohammed Kashani-Akhavan took a full-page advertisement in Gulf News today to make this point.

He argues that the cancellation of many projects in Dubai will reduce the upcoming supply of property and ensure ‘significant growth in the value of Dubai properties in the future’, and that the rate of return on rental properties makes ‘Dubai one of the best cities in the world for long-term property investment’.

Mr. Kashani-Akhavan points to Dubai’s ‘capable and committed leadership that has managed to turn Dubai into one of the most important cities in the world’ and said that should give investors ‘every confidence in Dubai’s future prosperity’.

He says he has 27 years of experience as a UK property investor and sees the present time as a ‘great time to invest in Dubai property’ because the golden rule of successful property investment is to ‘buy low when everyone else is selling’.

Dubai not London

How interesting that this man who says he has managed to ‘profit well from property investment over the years’ now appears to be picking Dubai over London as an opportunity in the global financial crisis. He could well be right and the rebound potential for the property market is better in Dubai.

But how swift will a recovery be? And is there further downside in local property prices to come? This is a tough moment to make such a call. Oil prices could fall further in 2009 and the UAE economy lags oil price falls by six months or so. Could a fall in the US dollar attract back the UK and European buyers who have fled since the summer? Perhaps but they have their own problems these days.

However, on the whole this gentleman has a good point: where will the global economy show recovery first? The UAE has to be a good choice and price weakness in local property should indeed prove to have been the time when everybody wishes they had been brave.

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