Wednesday, April 22, 2009


All sorts of news regarding the collapse in Dubai. For my part, this seemed [obvious] there was a bubble when this story came out.

One of my hobbies being bubble indentification, I am always pleased when projects like the above start receiving popular press.  More examples of this phenomenon can be found here.

By Ayesha Daya
     April 22 (Bloomberg) -- Dubai house prices may slump as
much as 70 percent from their peak late last year as demand
drops and banks fail to resume mortgage lending, prompting
mergers, UBS AG said.
     “We are still in relatively early stages of the property
down-cycle in United Arab Emirates,” Saud Masud, a Dubai-based
analyst at the Swiss bank, wrote in a report to clients dated
yesterday. “We believe risk-reward profiles are not yet
compelling for investors to consider market re-entry, hence
continued price declines are expected.”
     Economic growth in Dubai, the second-biggest of seven
states that make up the U.A.E., slumped after the worst
financial crisis since the 1930s hurt its property, financial-
services and tourism industries. The economy may contract 2
percent to 4 percent this year, Standard & Poor’s Ratings
Services said in a report last month.
     UBS downgraded Emaar Properties PJSC, the U.A.E.’s biggest
developer, and Union Properties PJSC to “sell” from
“neutral” as first-quarter results “will be disappointing.”
     House prices in Dubai have slumped at least 25 percent
since their peak, and apartments have tumbled 39 percent, UBS
said. Dubai’s majority expatriate population may drop 8 percent
this year and a further 2 percent in 2010 as residents lose
their jobs and leave within 30 days in accordance with the
emirate’s visa laws, the Swiss bank said.


     Property prices in Dubai quadrupled in the five years to
September 2008, helped by new laws allowing foreigners to own
property and a growing expatriate workforce. Falling property
prices now raise the prospect of rising loan defaults. Real
estate loans of U.A.E. banks, including mortgages, stood at
172.74 billion dirhams ($47 billion) at the end of 2008, or 17.8
percent of gross domestic product, the central bank said.
     Dubai may see “significant consolidation among its key
developers in addition to smaller, less visible ones,” UBS
     The analyst started Abu Dhabi-based Sorouh Real Estate Co.
with a “sell” recommendation and downgraded Aldar Properties
PJSC to “neutral” from “buy.”
     Dubai and its state-owned companies borrowed $80 billion to
finance its transformation into a regional financial and tourist
hub as crude prices rose after 2002 and expatriates flocked to
do business in the oil-rich Persian Gulf.
     It has had to delay projects and seek funding as growth
slows in the region, which pumps almost a quarter of the world’s
oil, after crude prices tumbled about by $100 a barrel from
their $147.27 record in July. Crude oil for June delivery traded
at $48.55 a barrel at 12:07 p.m. London time.

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