Buying investment property in Dubai

As a professional blogger and real estate analyst, I spend all day researching and writing about the subjects I am requested to investigate for clients, or covered on my blogs, one of which is about investing in real estate in Dubai and I am often asked - Is Dubai a good property investment?

I would have to say – this depends – and if you are considering buying property in Dubai, do some research. As a small investor looking to build a nest egg – it is almost almost certainly not. As an institutional investor or criminal looking to launder money – it almost certainly yes. Prices of property in Dubai have fallen as much as 70 percent over the last few months and most analysts agree that the fall is by no means over yet.

The simple fact is, the Dubai real estate market is a mess at the moment. They attempted to do too much, too quickly and there is no fundamental demand. It was all hype and easy credit. The easy credit has dried up, property values have crashed and an awful lot of small investors have lost their shirts. Small developers are not getting paid for their work, estate agents are going broke left and right, the amount of scams coming to light is frankly disturbing and lawsuits are starting to fly all over the place. Which is itself creating another issue. Dubai and the UAE do not have a sophisticated legal system and many of the recently written laws have yet to be tested.

Although the easy credit has dried up, the hype continues. The media is being inundated with press releases from developers and agents claiming the bottom of the market has been reached and offering “ assured returns, “ and “guaranteed income.” The Dubai banks are in just as much of a mess as the rest of the world’s banks. Perhaps even more so because they effectively operated in only one area – the Dubai property investment market. A lot of small investors holding investment properties in Dubai and hoping to flip them before the final payments came due were stung in the down turn. And the rules in Dubai are a little different to the west. Debtors go to prison.

The two biggest banks were rolled into a new bank and bailed out by the government of Abu Dhabi, and Dubai has just borrowed another $10 billion from their oil-rich neighbor.

There is a stunning amount of property for sale in Dubai, and much of it is part built, and part paid for. I personally would not consider buying investment property in Dubai until the dust has settled. Quite apart from the current liquidity crisis – Dubai has a number of other issues to deal with before it becomes attractive – or safe – for the small investor. Not least of which is an almost total lack of transparency in the real estate market.