Recent events have cleared the path and pointed to the direction of real estate in 2010 for Dubai in the United Arab Emirates (UAE) and Vancouver, BC, Canada.
News from Dubai stunned the world on November 25, 2009 when it was announced that the government-controlled holding company could default on its debt approaching 60 billion U.S. dollars.
The Dubai government said in a statement: “Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill’ and extend maturities until at least May 30, 2010.” This was in effect a declaration of a six-month suspension of debt repayments.
This has not only rattled the world’s stock markets, but it has effectively signaled the collapse of the Dubai real estate market.
Until this announcement, there has been only positive spin and a rosy outlook from the government on a market that was clearly in trouble. Unfortunately, in a society as tightly controlled as most in the Arab world, it seems only the locals knew the truth.
The Dubai real estate market relied on massive foreign investment to support its real estate adventure. It can even be opinionated that prices of Dubai real estate (in the exuberant times) were escalated by companies to paint a picture of prosperity and create a sense of urgency to entice purchasers before prices went up.
That is what happens when the largest players control the game. When there is no control of the players, then the game is effectively rigged.
Dubai was and is a city where “it has more construction workers than there are citizens of the city (over 80% of Dubai’s population consists of expatriates)”.
It is a city of the world’s tallest, biggest, bigger yet and biggest yet! A city built to break records and build the inconceivable and unimaginable. That it did and did very well.
Unfortunately, what it did not do well was balance the basic real estate principle of “Supply and Demand.” Dubai was overbuilt and the pace of its growth was not tempered by any logical measure. It was as artificial and unsustainable as its grandiose islands.
So what has been the recent performance of the Dubai real estate market? Well, various sources currently peg it to be down about 50% from its peak in 2008 and speculation is that it could plummet a further 30% from current levels.
In April 2009, an analysis from UBS Bank predicted that, “House prices in Dubai could plunge by up to 70% from their peak levels in 2008.” Was anyone listening?
As I write this article on December 3, 2009 it seems that real estate investment in Dubai is currently a losing proposition. The market will go down in 2010, which is clear. Whether is goes down a further 30% as predicted is uncertain.
The basic certainty is that it will go down in 2010; the negative market momentum seems unstoppable, for now.
As a complete opposite to Dubai, Vancouver, BC, Canada is a city poised for positive real estate growth in 2010.
Vancouver’s market has weathered the economic tsunami known as the “Global Financial Crisis” of 2008-2009 relatively unscathed.
Sales figures from the British Columbia Real Estate Association (BCREA) show that the real estate market in British Columbia is poised for a 20% increase in 2009 with a further 8% rise in 2010.
Vancouver will be hosting the 2010 Winter Olympic Games in early 2010. Not only will the world be watching the athletes, but also the city of Vancouver, the province of British Columbia and Canada will be showcased for the entire world to see. You could not ask for a better marketing campaign for a real estate market.
Vancouver is not Dubai. It cannot compete on the scale of having the tallest building in the world or having the biggest indoor artificial ski hill. But what Vancouver has is real, not artificial.
Vancouver’s beauty is that it has real mountains, real lakes, real rivers, and natural beauty. It is a city on the water bordered by mountains and surrounded by nature. It has once again been bestowed the honor of being named, “The Most Livable City in the World” by the Economist Intelligence unit headquartered in London, England.
In 2010 during the 21st Winter Olympic Games, the secret that is Vancouver will be showcased to the world.
What do you think that will do to the Vancouver, BC real estate market?
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I think Dubai property market will grow in 2010 because the effects of global crises are going towards end and real estate requires the transparency in all the sectors of market. Real Estate Regulatory Authority needs to provide translucent analysis about all the affairs of market which are necessary for the confidence of buyers.
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