Tuesday, August 08, 2006

Investing in the UAE: caution is advised

Gulf News has a pair of articles today about investing here.

1. Distress sale of Dubai homes up

Wipperman said residential blocks on distress sale were mainly four to eight-floor middle income housing units owned by single investors with purchase prices ranging from Dh10 million to Dh40 million. Their owners face a cash crunch because slower-than-expected infrastructure development has delayed sale of these projects.

A slowdown in take-up owing to inadequate retail financing in some instances resulted in greater-than-anticipated cash demand on investors while some face a cash crunch owing to poor recent stock market performance.

Property prices in the UAE surged in 2003-04 after the government allowed foreigners to buy homes in 2002, enabling most investors to make hefty profits on re-sales at high premiums. But values are now beginning to reach a plateau and prices could fall further this year as about 60,000 new units are expected to hit the market by the year-end. Still, residential rents are estimated to rise some 17 per cent on the average this year after jumping 30 per cent last year as a fast-growing economy attracts thousand of workers from other countries.

Demand for commercial real estate, retail space and villas, however, still remained strong.
See also the comments following the article.

2. Call for better corporate disclosure rings in UAE
UAE companies must reveal more information to investors and improve corporate governance if they are to help curb the sharp swings in local share prices, a top investment professional said.

The call came a day after the UAE market regulator said it had issued warnings to two local and five foreign listed companies for not meeting the July 31 deadline for reporting their second-quarter results.

Zuheir Tamim Al Jarkass, president of CFA Emirates, the local body of chartered financial analysts (CFA), said investment analysts in the UAE find it hard to forecast a company's cash flows or evaluate risk, since firms do not disclose adequate and timely information.

He said investors in the UAE generally rely on rumours rather than on educated investment advice, which cause the wild gyrations in local stock markets. The number of analysts following companies and publishing research on them in the UAE is also small.
It's fair to assume that if you don't file on time it's because you've got bad news.


Blogger nzm said...

Re the first article: it mentions that this is happening to properties with purchase prices over 10million dirhams - I would venture to say to that it's happening to properties with much lower values too, maybe not for the same reason.

Our Greek landlord is pulling the plug on Dubai and moving back to Greece as it's no longer attracive for him to be here. He's selling the apartment that we currently rent and which he originally purchased for 1.3mill. 2 years later, he want 2.6m for it which I think will be a hard sell.

The point I wanted to make is that sales are also happening on lower value properties because people want to leave Dubai. Another variation of the term distress sale!

10:58 AM  

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