The global financial crisis has hit Dubai particularly hard and Dubai’s property bubble has burst in a big way. Banks and property companies are renegotiating or defaulting on contracts left and right. The lawsuits are already starting to fly according to Reuters news agency.
Prices are low, mortgages are cheap, and buyers are finally starting to emerge from their hiding places, even if they are doing so ever so tentatively. If you’ve never purchased real estate in the United States before, it’s a good idea to take stock of what such a venture might cost, even at bargain basement prices.
The amount of property for sale in Dubai is now having a strong effect of rental yields. Unable to sell, many owners are putting their property on the market as a rental unit instead. This is having a marked effect on rents. RERA (The Real Estate Regulatory Authority) published its new guidelines, showing a 50% fall in rents in certain areas of Dubai and Landmark’s report this month shows a further 30% fall in Palm Jumeirah and recommends even cheaper rents than RERA’s. This is good news for prospective tenants, and suggests we still have some way to go before Dubai’s property crash bottoms out.
According to Ben Bernanke, the Federal Reserve chairman, all the major US banks are now solvent and prepared to weather the downturn, so you can expect house prices to start climbing again. Except for the small matter of needing another $130 billion in capital. Not being an economist, I don’t expect to be able to understand why a solvent bank would need to raise more capital, but there you go. Thankfully, the banks can also value their assets at whatever price they feel is appropriate so all is now well. General Motors will only lose $6 billion this quarter, so we should see some improvement in the general economy. Only 12 % losses in the commercial property markets are now expected, despite the fact that commercial property has devalued by around 40% since peak prices.
Permanent property exchange offers a way for people to upsize or downsize or simply swap within their own country or abroad. There are many sites now popping up to allow owners to list their properties. Here I detail a couple of swaps and various websites offering property swaps.
A lot of changes are happening in the investment property world at the moment. The most alarming thing seems to be the introduction of yet more rules and regulations that will ultimately be applied only to the smaller investor and the increasingly apparent need of the governments to raise enough money to pay for bailing out the various industries and corporations deemed “too big to fail.”
If you seek change, why not exchange? If you have property in the UK, France, even Spain, and simply can not sell, why not try Bulgaria? If you’re an investor, looking for bargains, take a look. You may be pleasantly surprised at what’s available!
Although Federal Reserve Chairman Benjamin Bernanke was out in front of new cameras today declaring the severe recession impacting the U.S. will ease by the end of this year (it will? seriously?), a May 5th Reuters news release noted that losses of up to 12% on commercial real estate loans over the last two years are expected to be revealed at major banks undergoing recent government ’stress tests.’ Regulators expect to cite these commercial real estate losses as the main reason that some of the largest banks in the world now need even more capital.
More on Stress Tests to Reveal Commercial Real Estate Losses
Lately, even the mainstream media in the United States are overdosing on apocalyptic reporting.
Once you’ve covered a global financial meltdown, a global swine flu pandemic, the bursting of the largest residential real estate bubble in memory, the prospect of bankruptcy at two of the Big Three auto manufacturers, U.S. policies on torture (and its salient drawbacks and rewards), and the spectre of thermonuclear war waged by any of a handful of rogue nations currently run (or about to be run) by insane persons, you do start to get a little jaded.
More on Will Commercial Real Estate Be the Next U.S. Financial Disaster?
With investment companies buying up distressed properties in places such as Bulgaria, to hold on to for long term capital gain and eventual profit, maybe smaller investors should be looking to follow the same path.
