The Problems Faced by Dubai Property Market in 2010

I have just read an excellent article on Dubai, that laid out all the potential problems the emirate will face and the potential solutions to those problems in order to get the market moving again in 2010.

Basically you have the massive $22 billion owed by state-owned developer Nakheel, which is a huge overhang as they continue to negotiate with the banks on a standstill agreement.

This, the author Peter Cooper says will affect buyer sentiment for at least the first half of the year. He says that, while the company being wound up in failure to pay the debt would: "have a major impact on the local real estate market" and "hit asset prices across Dubai" it would it would also represent a clearing of the air and something of a new start for the market. As the dust settled and bargains were snapped up, the future might look a lot more straightforward."

The sad thing is, he is right. That is what the world has come to; people can borrow and default on what would have been an unimaginable sum of money the last time the world saw such a recession, when a 6 year war of almost all the world cost less than half the price.

That is why the financial world came crashing down around us; because it got to the point where there was no accountability for financial irresponsibility, and unfortunately it seems that we are failing to learn the lessons the collapse should have, and seemed likely to teach -- perhaps because it didn't get as bad as we all know it could. But anyway, I digress.

What Cooper rightly pointed out is that; the debt standstill request damaged sentiment to Dubai at a time when it might have been rebuilding. When Colliers said prices rose 7% in the third quarter, and Asteco said prices stabilised towards the end of the year. And that this restructure or bust needs to be sorted quickly and efficiently so the market can put it in the past.

The other smaller debts are also a problem, Cooper says, like the measely $1.9 billion owed by Dubai Holdings. But not as big a problem as the continued lack of liquidity to get the "plethora" of stalled developments by smaller and now pot-less and credit-less developers.

I'm sick of making predictions already, so I'm just gonna end on the same note as Cooper did in reverse: now may well be a good time to buy property in Dubai, but is sure as hell aint a good time to own property in Dubai.

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