The EFG Herms report on Dubai Property was published last month establishing 2007 a year of transition for the local market here. A gentle decline pattern observed in Singapore from 2000-03 was highlighted as being the likely scenario for future here. Hong Kong saw a huge boom in property sector pre British handover in1997 which rose to a peak position in 1998. Since then the prices fell down hugely by 70 percent till 2003 before they started their recovery coarse. By the end of 2006 the property prices in Hong Kong were greatly recovered and are expected to rise further by 20 percent in 2007. Therefore the investors in Hong Kong followed an unstable path till now.The property prices in Singapore went up by 37 percent in two years after 1998. After millennium these prices fell by 30 percent till 2003 but have improved by 10 percent since then.
The Scenario in Singapore:
According to EFG Herms the present day demand and supply situation in Dubai is much like that of Singapore in 2000. With the Launch of $140 billion cityscape project, it looks parallel to the over development situation that existed in Singapore. However the EFG does not negate the potential corrections in Dubai Property. The Hong Kong scenario would be an extreme possibility, but as Hong Kong experienced, great periods can be followed by tough times!
Hong Kong’s Trouble:
The Asian financial crisis wreaked Hong Kong during 1997-98; later, the 2000 dotcom crash hit hard on local investors; and more blows were given to the economy by Acute Respiratory Syndrome crisis in 2003. However Hong Kong proved to be a strong regional hub that recovered from these situations paving way for some of world’s highest real estate prices. Although it is hard to imagine Dubai share the same rounds of misfortunes, but it is still strong enough.
The most important point that EFG Herms raises is whether the property schemes would actually materialize or not. Many projects scheduled to be completed are worked upon by small developers and not government or quasi-government. The Report figures that many projects might just not reach completion stage due to inexperience and small size of developers. Therefore the market adjustment for supply in a slowdown situation could by much larger than estimated.
The Scenario in Singapore:
According to EFG Herms the present day demand and supply situation in Dubai is much like that of Singapore in 2000. With the Launch of $140 billion cityscape project, it looks parallel to the over development situation that existed in Singapore. However the EFG does not negate the potential corrections in Dubai Property. The Hong Kong scenario would be an extreme possibility, but as Hong Kong experienced, great periods can be followed by tough times!
Hong Kong’s Trouble:
The Asian financial crisis wreaked Hong Kong during 1997-98; later, the 2000 dotcom crash hit hard on local investors; and more blows were given to the economy by Acute Respiratory Syndrome crisis in 2003. However Hong Kong proved to be a strong regional hub that recovered from these situations paving way for some of world’s highest real estate prices. Although it is hard to imagine Dubai share the same rounds of misfortunes, but it is still strong enough.
The most important point that EFG Herms raises is whether the property schemes would actually materialize or not. Many projects scheduled to be completed are worked upon by small developers and not government or quasi-government. The Report figures that many projects might just not reach completion stage due to inexperience and small size of developers. Therefore the market adjustment for supply in a slowdown situation could by much larger than estimated.
6 comments:
A correction may be due but the prices haven’t peaked yet and even if supply catches up with demand the market will stabilise and we can expect then a soft landing.
At the moment opinion are so divided as when the market will cool down or as mentioned in the previous comment which predicts a soft landing. There are some talk about the market and that it will be flooded with so many properties fairly soon and that will impact the market at large. What others are saying, a correction is not imminent at all and the market is likely to keep going for the next five to seven years, maybe the pace might change at times but it will keep going. Well I think personally that this year and next year will be decisive as to how this market is gearing towards.
I think it will take more time to get to know what will happen in a market like Dubai, I think the comparison is not correct.
Why is it that people want to predict the unpredictable, it doesn’t matter what other market have been through, Dubai is a unique experience by all means and what will happen is for sure something out of the ordinary, all you analysts out there just sit tight and wait for it to happen.
I believe that Dubai stands a better chance as the volume is too small for the potential that the city has. The influx of expats and the petro dollar that is pouring from everywhere in the region, still plenty of expansion before we can draw a comparison.
Dubai is market but not for the faint hearted, it is a market where you need to take risk and wait to be rewarded and that’s what has been happening for those who really took chances and now are reaping the fruits.
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