1. Dubai Property Market Crash
ERIC TOM BIJI
01218

2. DUBAI
 Dubai can either refer to one of the seven emirates in
the United Arab Emirates (UAE), or that emirate's main
city, sometimes called "Dubai city" to distinguish it from
the emirate.
 A majority of the emirate's revenues are from trade,
manufacturing and financial services. Revenues from
petroleum and natural gas contribute less than 6%
(2006) of Dubai's US$ 37 billion economy (2005). Dubai
has attracted world-wide attention through innovative
real estate projects and sports events. This increased
attention, coinciding with its emergence as a world
business hub, has also highlighted human rights issues
concerning its largely foreign workforce.

3.  In 1990 Dubai was 15% the size of Singapore; in
2005 it was half its size and Singapore is no slouch
when it comes to allowing free-market economics to
rip.
 The economy of Dubai Emirate, which is
considered the trade and tourism center for the Gulf
region, has achieved a standard growth estimated
at a rate of 16.7% in the year 2004.

4. 1990 2003
2005 2010

5.  Following the passage of the long-awaited foreign property
ownership law in March 2006, a deluge of foreign money
boosted Dubai’s ambitions. Europeans, including
Russians, accounted for 20% of the buyers of all property
categories. GCC, Arab nationals and UAE nationals make
up 28%, Asians 40%, and Iranians 12%, according to
figures from Global Realty Partners. The overall foreign
ownership index of property kept by Colliers International
soared 116% from Q1 2007 to Q3 2008.
 From 2002 to 2008, Dubai’s property prices almost
quadrupled, and large-scale developments turned Dubai
into one of the fastest growing cities in the world. Some of
the biggest projects include Jumeirah Garden City
(estimated cost: US$95 billion), Dubailand (US$64
billion), The Lagoons (US$25 billion), Palm Jumeirah
(US$14 billion), and The World (US$14 billion).

8. Now if you go on the highway of Dubai
with so many sign broad written “Where
the vision of Dubai Gets Built.” Which
have been written from a long time but
no work is in process.

9. THE QUESTION IS WHY ?
Where did Dubai go wrong ?

10.  The Wall Street Journal reports that international "financial
analysts are starting to wonder about the amount of debt the
city-state is racking up." The article paints a picture of a city
with dwindling oil revenues but a limitless appetite for growth.
It places Dubai's debt, relative to gross domestic product, at
about 42%. That's pretty high compared to Abu Dhabi's debt
of 2.9% of GDP.
Dubai's debt load is four times the average among other
Persian Gulf states. Credit-rating companies are asking for
more information to determine how sound the government
really is.
In the end, if Dubai gets into financial trouble it would take its
neighbors with it. Or perhaps they're counting on a regional
bailout.
Some are concerned that Dubai is doing what many in the
U.S. did - overleveraging and spending too much with
borrowed money.

11. BUBBLES
 What happens when markets are manipulated
upwards (by whatever means), is that you can get a
“bubble” which is where the price ends up a lot
more than the “fundamental”. The next thing that
happens is that there are “mal-investments” that
only make sense at “bubble prices”.
 Then the bubble pops, and since bubbles are zero-
sum, the next thing that has to happen is that prices
have to stay much lower than the “fundamental”
until all of the mal-investments are washed clean.

12. DUBAI PROPERTY: A BUBBLE WAITING TO BURST?

13.  There is also another reason to be cautious when it
comes to Dubai property - the boom in prices is a bubble
waiting to burst, fed principally by speculative purchases.
 Late in 2004, Middle East Business media reported that
85% of off-plan flats and 50% of off-plan villas were
bought by speculators, most of whom sell before
completion. This means that most homes are secured by
10% deposits and then traded like shares. The majority of
those buying have no intention of living there.
 Some Dubai builders already recognize the “fragility of
this speculative frenzy” but may be too late in looking for
larger deposits. “A global economic downturn or a local
housing crash, or both, could turn this investment-led
boom into a major slump.”

14.  Up to early 2007 the price of housing (rentals and owned)
had tracked the ratio of economic activity divided by the
numbers of housing units, just like it does everywhere in the
world. Sure interest rates are important but local interest
rates hardly changed over that period.
 The UAE’s property market, which suffered one of the
biggest crashes during the global crisis, is gaining
momentum. House prices have fallen by around 60% from
their Q4 2008 peak.

15.  Then the global credit crunch hit. Amlak and Tamweel, the
UAE’s two largest home finance companies, stopped
offering new loans. The two mortgage lenders accounted
for more than 50% of all mortgages in the country.
 Foreign investors suddenly disappeared at the end of
2008, as the global financial crisis hit the emirates. This
caused transaction volumes to plummet. The overall
foreign ownership index was 50% down by Q4 2010, from
its peak in Q3 2008.
 Almost half of all the construction projects in the UAE,
worth around AED1.1 trillion (US$582 billion), have been
either put on hold or cancelled, in response to falling
demand and deteriorating market conditions.

16. PROJECT LOCATION DEVELOPER VALUE (US$) STATUS
Jumeirah Gardens City Satwa district, Dubai Meraas Development 95 billion On hold
Mohamed Bin Rashed Between Al Khail Road
Dubai Properties 55 billion On hold
Gardens and Emirates Road, Dubai
Between Phase 2 of Ibn
Nakheel Harbour & Tower Battuta shopping mall and Nakheel 38 billion On hold
the 75-km Arabian Canal, Dubai
Mudon Development Dubailand Dubai Properties 21 billion On hold
Along Dubai Creek,
Culture Village Dubai Properties 13.6 billion On hold
next to Garhoud Bridge
Palm Deira Deirah coastal area, Dubai Nakheel 12.5 billion On hold
Al Burj Tower (The Tall Near Jumeirah Lake
Nakheel 8.2 billion On hold
Tower) Towers and Dubai Marina
Universal City Dubailand Dubailand 2.2 billion On hold
Aqua Dunya Dubailand Dubailand 1.8 billion On hold
Nad El Sheba Race course 5-km southeast of Dubai Meydan LLC 1.3 billion Cancelled
Falcon City
Dubailand ETA Star 0.68 billion Cancelled
of Wonders
Dubai
Within the Jebel Ali Airport City n/a 0.45 billion Cancelled
Exhibition City

17. FIGHT BACK OF DUBAI PROPERTY
 Positive economic growth, strong government
support, and mortgage lenders returning to the
market are helping property prices stabilize, though
local analysts are generally pessimistic about future
price prospects.
 In an effort to help the market, the government has
announced over AED165.25 billion (US$45 billion)
worth of future projects, which includes investment
in transport infrastructure. This is expected to
create more jobs and increase demand for real
properties.

20. FUTURE OF DUBAI PROPERTY MARKET
 Dubai is still seen as the premier place to do
business in the Middle East and beyond. It is a
preferred base for not just Arab but Pakistani,
Iranian and even Indian businesses, due to the
wider region's political uncertainty. Its reputation for
liberal attitudes helps.
 Insofar as property is concerned, prices are on the
“fundamental” now; they may go down a bit as the
last of the developments get finished which will
drive the fundamental down. After that, prices will
start to rise, albeit quite slowly.

21. THANK YOU…..