By Diana Hill, Online Trading Academy Real Estate Investor Instructor
If you've been to one of my presentations either in person or through a virtual classroom, you know that I refer to our Dubai center and the massive amount of real estate available there. So with Dubai in the headlines for the last month, I thought I'd take the opportunity to look a little closer at Dubai's real estate market and their investments in the U.S.
Here's a short history lesson on Dubai, known as the home of sand, sun and shopping. A century ago, it was a peaceful town where Bedouin traders and pearl divers lodged. Today those merchants are gone. The city stands with its futuristic skyscrapers, alongside mosques, as one of the greatest cities in the world. Dubai boasts of its tremendous development at a pace unparalleled anywhere in the world. If you look into the ancient history of the region, there are suggestions that humans have been living there since at least 3000 BC. What a dramatic change!
Dubai has a prime location between the Mediterranean and the Indian Ocean. These trade routes have been exceptionally valuable for much of this area's history. By the late 16th century, the Portuguese controlled local trade routes. This pushed the tribes that had lived on the land to oases, far from the coast. The British gained control of the region's waterways in 1766. Dubai was amidst local power struggles and European Imperialism. In 1833, the Bani Yas (a neighboring tribal power), under the leadership of Maktoum bin Butti, raided Dubai and took the area. The Al-Maktoum family still rules the emirate today. In 1971, Dubai became the seventh emirate of the newly formed UAE. Dubai's story is amazing, as one writer put it, "A rags-to-riches tale."
Now fast-forward to last month. Dubai sent global markets into a tailspin after requesting a six month "hold" on payments in order to restructure its $26 billion debt. However, on December 14th, Abu Dhabi, the oil-rich governing emirate of the UAE, surprised investors by pledging to provide $10 billion to Dubai, easing fears and tensions a bit.
I haven't personally visited Dubai, but many of my business associates have, and they tell me that vacant properties are everywhere. But international headlines have really triggered a lot of interest in real estate by what some would call bargain hunters; I call them savvy real estate investors. The opportunity to invest in Dubai has only been open outside the emirate since May, 2002. In 2006, Law No. 7 legalized "the freehold ownership of land and property for the UAE and GCC citizens, while awarding the same rights to non-GCC expatriates in pre-designated areas that are approved by the ruler of Dubai."
Rightmove Overseas, the international arm of British property website Rightmove, recorded a three-fold rise in the number of searches for property in the emirate in the days immediately following Dubai's announcement. "It's driven by the curious, looking to see what their money could buy," said Robin Wilson, head of overseas property for Rightmove.
Figure 1 The Elliott Wave International website provided the following statistics:
- Real estate prices have plunged 50% so far in 2009, with the expectations for further declines of 20 to 30% by year's end.
- At the end of the third quarter of 2009, office space prices had plunged 58% from levels seen a year prior.
- Occupancy rates in recently finished buildings stands at 41%.
- An estimated 400 real estate projects have been frozen.
You don't have to go to Dubai if you're interested in investing in property owned by Dubai World (emirates flagship Investment Company – creator of the iconic palm-shaped islands). CityCenter in Las Vegas, a joint venture between the MGM Mirage and Dubai World, opens this December. It is the most expensive privately funded project in U.S. history. This project has been spun off from the rest of Dubai World, and Wall Street analysts say it's unlikely that CityCenter will suffer from Dubai World's problems. In fact, MGM Mirage may find it has an opportunity to buy out Dubai World at a discounted price.
Over the last five years, Dubai World has purchased properties in Miami and NYC. Dubai World's real estate portfolio stretches across 100 cities throughout the world.
To quote the famous movie Field of Dreams, "If you build it, they will come;" a caveat to that is "when," timing is everything.
As with any crisis, there is always opportunity. In the next couple of months, we will continue to explore how to take advantage of the opportunity both here in the U.S., Dubai and around the world.
Great Fortune and Happy Holidays to you and yours!
- Diana Hill dhill@tradingacademy.com
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