Questions about supply and demand are mounting about real estate in the Middle East, and speculative investment is beginning to decline. In Dubai, property value corrections and signs of a credit crunch have already begun to appear. For more information, read the following article from PropertyWire.
The property bubble in the Middle East is bursting and is unlikely to show signs of recovery for at least two years, according to a British real estate expert.
The real estate sector has reached its peak and is now falling in line with prices and growth rates in the rest of the world, according to Professor Stephen Lee, a senior lecturer in real estate finance at London’s City University’s Cass Business School.
In the Middle East for the first Gulf Real Estate Fundamentals Conference, said there are also questions about supply and demand and how this is going to affect the property markets.
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"It has got to slow down at the very least, if not stop. A lot of the people buying property here are expatriates from the US and the UK, countries where the credit crunch has impacted the most," he said.
"The credit crunch has already hit Dubai—I have heard if you work for a property developer you will not even get a loan to buy a car," he added.
The conference chairman, who has 30 years’ experience in property development, investments, property finance, sustainability and environmental issues, said the problem now facing Bahrain and the Gulf was that supply was now beginning to outstrip demand.
"Palm Island in Dubai and Bahrain Bay, for example, will be completed, but is there demand for them? Next year is going to be a crunch time for this region. You have individuals who have wealth, but they will not spend their money if there is no confidence," he said.
The conference in Bahrain also heard that nearly 60 percent of construction projects in the Gulf have been postponed or shelved as a result of the global credit crunch. Sakana Holistic Housing Solutions chief executive officer R Lakshmanan said global confidence is at an all time low and the region’s real estate sector was bearing the brunt of the slump.
He also warned that because most of the industry’s liquidity had come from oil wealth, falling crude prices would only increase the impact on companies and investors.
This article has been reposted from PropertyWire. View the article on PropertyWire’s international real estate news website here.