Luxury Real Estate in Dubai Not Appealing

The consensus amongst investors seems to be to avoid the Middle East in general and Dubai in particular as the global financial crisis is still having a large impact on these markets. The over supply situation of luxury real estate in Dubai has reached epic proportions and even the large conglomerates are shying away at substantial discounts.

Prices have fallen at least 50% from peak, with some areas having dropped as much as 70%, and it is hard to see where the demand for this much inventory could possibly come from. A lot of speculators and smaller investors lost a lot of money during the crash, and there are some suggesting that even dropping many of the proposed developments – The World Dubai for example – has been “postponed,” indefinitely – is not going to help.

In a recent interview, Richard Price, chief of Asian real estate for ING Groep NV, Holland’s largest financial services company said, “We are not looking to invest in the Middle East. There is an awful lot of speculative development that remains unsold or unused and I don’t personally understand where the demand is going to come from.”

He is of the opinion that Hong Kong is the most attractive market currently and looks to be emerging from the crisis sooner than anywhere else, thanks to lack of supply. “There is a finite amount of high-quality modern residential stock in Hong Kong and an awful lot of cash in the system. Real estate is sort of the favorite home for local investors to put their cash.” Interview

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Certainly there are substantial stocks of investment property for sale around the world, even in the luxury property market. Picking which markets will recover and which will not will certainly be a challenge.