Still downside to Dubai property (Re-post)

* username: rupertbu

Despite the Dubai debt crisis of last December and much lower property sales there is still a downside risk to Dubai real estate in 2010, according to a panel of experts convened for a breakfast conference by Cityscape Dubai today.

This downbeat assessment of the outlook for local real estate also provided an insight into the opportunities that await patient investors.

Infrastructure built

Asteco Property Management CEO Elaine Jones told the seminar that business infrastructure now marked Dubai well ahead of its regional rivals, and that lower office and residential rentals meant that the city was unlikely to lose another major financial relocation to Singapore like Credit Suisse.

ING Investment Management’s head of equities, Fadi Al Said thought Dubai property prices still had some way to fall but that a bottom might be reached towards the end of the year. He pointed out that in many market corrections the bottom occurs below the cost of construction but that equities touch bottom six months ahead of real estate and might be close to the bottom right now.

Al Tamimi lawyers’ property head Lisa Dale cited a series of ongoing legal reforms that should gradually strengthen the real estate sector in 2010 – from regulations to protect property investors to strata law regulations and a trust law for real estate.

However, she noted that there is no concept of trading while insolvent within UAE law and that this is inhibiting the liquidation of insolvent companies, and making it ‘easy to stick your head in the sand’.

Coming bankruptcies

In response to a question from ArabianMoney about possible insolvencies and liquidations ahead in the Dubai property sector the panel was evasive, although the precedent of most real estate cycles is for substantial bankruptcies at this stage.

The general feeling was that Dubai is working through its real estate crash and the aftermath, and that Abu Dhabi is both somewhat protected and just later in this cycle. Clearly for those investors who get their timing right there are opportunities, and the major downturn in the UAE is already over.

So while downturn risk remains in Dubai property, the greater risk is now probably excessive pessimism and missing out on the upturn which cannot be far away.END