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Property Investing in Dubai – Value vs. Speculation

Value vs. speculation, which is smart investing? Property investing in Dubai can provide both to a real estate investor. That said, each must be applied at the right time, considering the Dubai economy at the moment.

Speculative property investing in Dubai proved very lucrative for those that took advantage of it during the boom.

I will not comment for those that were left the bag holding – as I am sure several jumped off the helipad up on top the Burj Al Arab.

For speculative property investing to work in Dubai, you must time the real estate market right.

You must buy low and sell high, that is no secret.

You also must have deep pockets if you don’t want to take a bath in your losses.

Value investing on the other hand, can be worked out well both in up and down markets.

You always have folks losing their jobs or getting into a divorce and thereby losing their properties to foreclosures. The key in value investing is understanding the rental market, which is a reflection of the bigger economic situation.

For example, during the 2008-2009 global economic crises, property values in Dubai tanked big time. I am talking north of 60% reductions in values. So you are probably thinking this is a good time to buy for an investor right?

Let’s take a step back. If you are a speculative investor and are speculating that the market will go up in the future, sure go for it. But remember, you must have the deep pockets to withstand the test of time. In addition, consider that values can always go even lower.

If you are a value investor, and are counting on rental revenues to offset your investment (or mortgage payment to the bank), think about whether you will get the tenant you need to fulfill your investment objectives. During recessions, employers cut jobs. 90% of folks in Dubai are expats, and when they are downsized, they have to leave the country because of visa expiration.

If population declines, and the number of investment properties increase (because investors buy them due to good values), you have to think about who will be occupying these properties. Are there enough tenants around? Consider your competition.

Smart investing requires awareness of both the local real estate market and the overall economy. Buying property in Dubai is one way to put smart investing to work. However, Dubai properties are volatile due to Dubai’s heavy reliance on outside revenues coming in from travel and tourism.

If Dubai was more self sufficient in its own, I’d advocate value investing throughout. However, because the economy depends too much on expats, your approach to investing in Dubai must be calculated very carefully.

Investing in Dubai can be extremely lucrative in good and bad markets. As history has shown us, economic ups and downs are cyclical. What goes up must come down, and what comes down eventually goes up with time again. Isn’t that how water evaporation and rain works?

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