The global recession or depression is well on the way as the financial crisis hits stock markets and banks all over the world and property prices are falling rapidly in well established markets such as the UK and USA as well as Europe. Many analysts are predicting a drastic price correction in Dubai, but this seems to level out with an expected price correction as supply of properties will eventually hit the markets at the end of 2009 and 2010.
Large and small investors, have profited greatly from property price escalation during the last few years, but as the recession spreads, many are wondering what to do next.
Should investors hold on to their properties through the price crunch and try and see it through to the other end, several years away?
Or should they take a hit on their profits and try and get out?
Many investors have borrowed against their assets and are facing uncertainty as the value of the property falls below the borrowed amount (negative equity). Some were wiser and sold most of their property over a year ago.
The Global Financial Crisis is in full swing and warnings are being issued daily all over the world about the economic meltdown. Scenes of the depression in the early 1900s are being replayed by many. Though many keep saying that the economy have strong fundamentals, recession has started having its impact on the UAE too.
Agents in Dubai who have been working in the real estate sector for the past few years are commenting that few are buying property right now, while many are still renting. Who are these few? Large International or local companies and corporate clients – end users, and real estate investment funds are getting advantage on the opportunity to acquire prime property for less. For example, media-driven fear forced the price for commercial space in Jumeirah Lake Towers to 20% lower only in three weeks.
However, premium properties are holding their value and experienced investors refuse to consider offers bellow the market value of few months back.
In general, as the market is slowing down, many of the smaller real estate companies may be forced to close and the big ones to reduce the number of staff.
Some buyers are apparently defaulting on their installments, preferring to lose the 5% deposit they have already paid rather than risk paying for a hugely over priced property, just before price correction.
Large developers are facing rumors that they are in financial difficulties.
Thousands of properties are on the market for resale at very low premiums. Some consider the current situation as the right time to buy the desired homes at the right price.
The authorities in the UAE have been making changes to the visa regulations and real estate laws and many of these are having a detrimental effect on the market there.
There are changes in the attitudes of mortgage providers and there are more clauses, but still individuals continue to qualify for mortgages on property even from the resale market.
How can the worries of the common expat or his local fellow be addressed?
How we can be reassured that the crisis of the American banks need not necessarily affect our daily lives and things can indeed look brighter?
There will be no easy solution in sight in coming days. The only solution is that we could simply adapt into the new world order and use a comon sense.
