www.dubaipropertycrash.com

We count ourselves amongst those that rather like the idea of owning a holiday pad in Dubai, perhaps something we could use for a few weeks each year and have it rented out for the rest of the time. Something that would appreciate in value over time too – well thats a plan that has been knocked on the head for a year at least.

Our feeling is that prices have some way further to fall in 2009 before they will stabilise. However like any prediction it gets fuzzier the further in the future you look – it is important to keep reassessing the outlook month by month. A reccy trip in a few months time is definitely on the cards, probably once we get our latest apartment conversion project here in the uk past the initial build stage and nicely ticking along.

We stayed away from the ‘flipping’ game in Dubai despite being egged on by friends who were ‘in the know’. To be fair to the wisest of them, Salman, he advised not to hold on to anything for more than the first couple of payments. That way at least you would have a high probability of profit with minimal risk, and then you could re-invest quickly. The risks were always from the constantly expanding supply of new developments and rental glut if you held until completion.

One thing none of our ‘advisors’ foresaw was the credit crunch that has battered the market so savagely.

Too good to be true?

Our trouble is that we were too suspicious, even of the quick fire approach, being strict adherents to the “if it looks too good to be true then it probably is” rule. Not that we are totally risk averse – on the contrary we have been property investors and developers in the UK for the past decade (and still are). The key point here is that we understand the uk market with great clarity. Enough clarity to have been net sellers of assets over the past 2 years, in anticipation of the bursting property bubble.

As for Dubai, we could honestly say we didn’t understand the market enough to put our hard earned cash there, into the hands of who-knows what kind of system. Trying to make profits flipping property in a peaking market is like the analogy of playing ‘pass the parcel’, the popular birthday party game, except in this case the parcel is a ticking bomb and the last fool left holding it gets his hands burned.

It is true that investment reward is usually proportional to the investment risk. This is as it rightly should be. We therefore give a hearty round of applause to those individuals that put their (own) money on the line and have reaped mega rewards on the upwards leg of the Dubai boom. They took the risk of handing their cash over to developers in an immature foreign land where the legal system has not had time to develop, settle and stabilise and where residency and ownership rights are shaky at best and at worst capable of changing overnight. So if they made money they deserve it.

The Dubai Experience

Of course not everyone buys property simply to flip as an investment. Often it is for practical reasons such as the expats who are actually working out there, or for those like us who can’t see ourselves as part of the Dubai working culture yet would enjoy a holiday pad for our families, where we could select the time of year when the weather was balmy and beautiful. We could be partial to a bit of shopping heaven, some dune bashing, fine cuisine and beach frolics (and no – we don’t mean the kind that gets you deported!)

Ultimately, once one is over the Dubai experience itself, a pad in Dubai would also be a great point from which to branch out and explore the wider region, including the neighbouring gulf states as well as slightly further out to Singapore, Hong Kong etc. Last time we were there we visited Oman, which although just across the border was an entirely unique experience in itself, with its more mountainous terrain and unspoilt landscapes. The capital, Muscat, had a superior tranquility about it and its pristine, quiet roads were lined for miles by manicured lawns, trees, shrubs and flowers.

Still, we are city types and there’s only so much tranquility that we could bear before our heads would explode, so the clamour of Dubai was in the end just as alluring. But the juxtaposition of old and new, fast and slow, city and mountain, concrete and nature meant that a taste of each enhanced the appeal of the other.

Conspiracies and Secret Agendas

Before ending this post, we return to our pal Salman. Being the wise person he is (quite the entrepreneur) he shared with us his personal conspiracy theory about Dubai property prices and the crash to come, which at the time one year ago, no-one was predicting. We laughed it off at the time – and still do – but will share it with you anyway just for fun.

He proposed that the speculation and rampant price escalation was an anticipated event, something encouraged and perhaps even helped along, but not by the sheikhs or any emiratis. No! This was a conquest by stealth, a takeoever under the guise of free market forces!

Imagine a sinister plot by some unnamed outside powers, who want to get a foothold in the centre of the gulf region, slap bang next to major oil producing regions and tactically close to states deemed as global threats. The dilemma for these powers is how to get control of this jewel without causing a war; how to creep in under the radar?

Well how about financing masses of property deals and bankrolling the government to get more and more debt laden. Those powers-that-be would be well placed to win when the market went up by a great return of interest payments on their capital lent out.

Ultimately when the market crashed, they would acquire defaulted property en masse, thereby becoming major landlords, and perhaps even the government would be at their mercy, especially since it has very little oil reserves and the oil price is at a low point in its cycle. Their power and influence would steadily increase, perhaps with the ultimate aim of becoming the dominant voice behind a puppet state.

Is such a scenario probable? We think its unlikely.
But is it possible? Well………….its not impossible.

Our conclusion is that its just another conspiracy theory. You may beg to differ. We await your comments.