Dubai to see property downfall within the next 18 months

Speaking at the Cityscape Global Conference, Faris Mansour, director of Mubadala Pramerica Real Estate Investors, which is 50:50 joint venture between Mubadala – the Abu Dhabi investment vehicle and Pramerica Real Estate Investors, said ‘The massive use of capital at emerging markets will eventually raise the cost of capital over time. That cost of capital will have a direct effect on real estate.’

He added that investment in the Dubai property market as a result of the Arab spring was also temporary. As seen previously, as soon as the issue of liquidity emerges, that capital would move on to other markets.

Bahrain Bay CEO Robert Lee, who was speaking on the same panel debate, said higher property price increases were happening in markets such as Sydney, Hong Kong and Shanghai and Dubai was “benefiting from a global phenomenon”. He said Dubai was entering a precipice where “the economics of reality and the prices don’t jive anymore”.

Miguel Guadalupe, COO at Pacific Ventures, which entered the Dubai market after 2008, said it was seeing end users rather than “flippers”. He said feedback, including from other developers, was that they were not merely investors but families who wanted to live in Dubai.

Jammal Hammoud, CEO Milestone Capital US, said the price increases of the past 12 months were not sustainable and were the result of a “glitch” in supply over the past four years. “For the past four years there has been no growth,”. He added that geopolitical issues had seen investment in Dubai. “This is unsustainable; the situation here is going to change.”

Tariq Ramadan, chairman of the UAE’s Tharaa Holding, said he believed the property market was “definitely in recovery” with prices at 2007-2008 levels that “in my opinion are sustainable prices”. “Everything is picking up in Dubai and that’s driving sustainable growth and demand,” he said.He said he believed speculative buyers existed for about 10 projects under Damac and Emaar. This compared to 200 projects between 2006 and 2008 where speculators were very active.

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Dubai Marina, Dubai U.A.E.