The International Monetary Fund (IMF) once again urged for greater measures to be applied in order to avoid a new property bubble in Dubai. The concerns were expressed by Masood Ahmed, an IMF representative and regional director. In one of his latest presentations, cited by Reuters, he states that the grim 2009 scenario can indeed repeat itself. According to him, the current measures that aim at averting the catastrophe may not be enough.
IMF’s representative does refer to the recent anti-bubble actions taken by Dubai’s government as being “good.” For instance, Masoon Ahmed agrees with the decision of UAE’s central bank to change its lending policies. Despite that, additional much tougher measures are requires . Otherwise, Dubai may face a new bubble burst very soon.
The main advice which the IMF official has for Dubai is to move away from a market focused on making fast profits. According to Masoon Ahmed, this trend is currently causing Dubai’s real estate market more bad then good. In his opinion, one way to oppose this tendency is by substantially increase sales duties.
In addition, Ahmed suggests that a great part of today’s activity on Dubai’s property market is linked to speculative transaction. IMF’s representative shares that the solution against this problem is again stronger measures.
According to Ahmed, these problems partly stem from the fact that Dubai’s property market can be classified rather as a cash market and not as a future market. This means that transactions are done in the present and not on some date in the future. Therefore, they are executed on the OTC (over-the-counter) market or on a regulated exchange. Sellers tend to prefer them since involve lower carrying costs. IMF’s regional director, emphasizes that Dubai needs to focus on long-term solutions and not on quick profit opportunities.
IMF’s Masoon Ahmed also states that Dubai’s real estate growth had little to do with real demand rates. Instead, he explaisd the main driving force behind the new bubble threat is “human greed.”
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