Expert Eye

Never make the same mistake twice

Past leanings can reduce or eliminate the possibility of repeat problems

As my investment banker constantly reminds me, past performance or occurrences may not to be true indicators of future events. However, learning from the past can reduce or eliminate the possibility of a repetition of mistakes. And adhering to this principle has proven advantageous when it comes to the current state of the Dubai real estate industry.

There have recently been comparisons drawn in the media between current real estate values in some areas of Dubai and the values reached in the heady days of 2007 and 2008.

For some investors, the news comes as a relief as they see value returning to their real estate investment; while for others,
the feeling that the same irrational exuberance experienced in 2008 which had such an inflationary effect on asset values, has returned.

It is safe to say that the Dubai real estate industry is now a significantly different space from what existed in 2008.

For a start, confidence in the market, which is what is driving the recent high demand for participation’ is now being driven
on more circumspect and critical analyses versus unbridled and sometimes blind optimism.

Compared to how it was before, we can say the industry has matured significantly. While values have been increasing rapidly, with some areas increasing 30 percent in 12 months, the environment this time around is not one of excessive speculation or irresponsible abandon.

For many investors, it is the increasing levels of governance, oversight and scrutiny of the industry which are actually under-
pinning their increasing confidence in the market.

The development of the industry in terms of its regulatory framework, laws and regulations to help protect both consumer and investor interests has been laudable.

In addition, the well publicized and appropriate measures to safeguard the market against irresponsible, speculative, predatory or unethical practices characteristic of the industry just before the last market crash reveals a mature and balanced approach to shaping an industry with a view to ensuring sustainable growth over the long term. In review, we can say that much has indeed changed in six years.

And developers, while confident and increasingly aggressive, have also learnt from the past. While real estate transactions in
Dubai exceeded Dh61 billion for the first quarter of 2014 (up by 38 percent YoY) , land transactions made up over 67%of all
transactions recorded. Land transactions which refer to land mortgages and  land sales transactions make up the bulk of the total figure.

Developers are really on the move, conceptualizing new developments and marketing them effectively. However, this time, developers’ plans are based upon realistic fundamentals such as Dubai’s non-real estate economic growth, population growth and the current inventory pipeline. This needs-based approach will help ensure that supply will be much more synchronized to realistic demand projections going forward.

There is no doubt that Expo 2020 has provided many with that added reassurance of demand longevity; however, it has
been the other sectors of the economy such as tourism and trade that have really initiated and strengthened the momentum of
renewed confidence.

So the leanings have been many but, more significantly, the introduction of initiatives and implementation of changes by all stakeholders have been broad and comprehensive. Are we looking at a repeat of 2008? I don’t think so.Based upon what we have learnt, the world is now a different place.

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