Property Investing in the UAE – what is going on?

Thinking of investing in property in the UAE? The latest news from the region does not bode well  – at least in the short term. Emirates business did a survey of real estate agents in the United Arab Emirates and discovered the consensus was “losses running into high double-digits,” for most agents. I am not quite sure what “losses in high double digits,” actually means, but it does not sound very good to me. Lost 99 dirhams?

They then go on to explain that what they means “drops in sales transactions of more than 9%.”

Upon further clarification, this turns out to mean – drops of transaction numbers in the order of 50% minimum and loss of earnings of around 60-80%. Some of the hardest hit agents and brokers have seen falls of 70% in transaction volumes, and the usually up-beat MD of Indiana Real Estate, Rajesh Kumar Krishna, admitted to a drop in commisions of over 80%.

Clearly this is unsustainable and I would expect to see a lot more agents go under in the UAE later this year and through 2010. The artificial strangling of supply by allowing developers and banks to hold massive stocks is not working in the US, Europe or anywhere else. Investors have been leaving in droves and the property investment scene looks radically different to 18 months ago. So many got caught with their pants down, the speculators have completely left the market. Prices have already fallen around 50% from peak, and I would expect them to fall considerably further before the UAE became an attractive property investment destination again.

Rents are falling, occupancy is falling, the inventory of unsold housing is substantial – and growing and the amount of people attempting to sell investment properties is quite substantial – just judging from the desperate tone of the badly written spam in my email inbox. Every one is selling and no one is buying. We all know where that ends up.