Saturday, 13 June 2009

Everyone’s talking nonsense

My head's spinning. Every day it seems, some "expert" gives their opinion on the state of the UAE property market and you couldn't get a broader range of opinions if you were discussing the All Black front row, or to use another analogy as there are local readers of this blog, whether Al Shabab should use the 4-4-2 formation. (Hey, don't blame me, I had to look it up on a website, I know zero...sorry nil...about soccer.)

These expert property opinions range from "the recession is over and prices are rising" through to "we're all doomed, abandon ship" with every shade of opinion in between. Its totally baffling. I thought about saving some of the conflicting headlines to write a piece on the confusion for the public who aren't experts and who need to make property related decisions but Anil Bhoyrul of
Arabian Business 13 June 09 has done the job already:

If you’re planning on buying a new home, I guess you only need to know one thing: have property prices bottomed out?

Depending who you believe, prices are now stabilising. Or they are actually rising again. Or they are falling just a tiny bit more. Or they are in freefall. Or you better get in now. Or don’t touch property with a barge pole.

Before you blog comments accusing me of being negative again, these are not my words but those of the experts. HSBC said in May that real estate prices in the UAE were stabilising after agreed prices in the two largest cities rose 4 percent in April and 5 percent in May from the previous month.

And earlier this week, Standard Chartered said that the market was stabilising after being in “freefall” for several months.

Yet today, from Deutsche Bank: “We expect UAE property prices to decline another 15 to 20 percent from current levels and only expect a bottom by year end.”

Hang on a minute. Two days ago, the respected National newspaper stated the following: “In Dubai, the price of homes in The Springs, Jumeirah Village, The Greens, The Green Community and Jumeirah Islands have risen from their lows in January by between five and 30 percent, according to Cluttons, an estate agency.”

Oh, and let me add that on Sunday, Arabian Business will publish an interview with ex-World Bank boss James Wolfensohn, in which he predicts that for global economies, “the worst” is yet to come.

So what is really happening? In the absence of any genuine and reliable data, I have come to only one conclusion: everyone who is trying to sell their property is lying.

They are lying about the price they will take, they are lying about how long it has been on the market, they are lying about how desperate they are.

Let’s take the quote from Cluttons, which says that in some parts of Dubai prices are up 30 percent since January. I hate to be blunt, but this is absolute, utter, complete and total nonsense. Codswallop. Tosh. I’m not accusing the very respectable Cluttons of lying. They are a great bunch of guys who have been around since 1765. (So please don’t call my CEO to complain late on a Thursday night, as some of your contemporaries like to do).

But they rely on statistics from their clients, and whatever they are getting are clearly flawed. A 30 percent rise since January would represent the biggest property boom taking place anywhere in the world during the last ten years.

Is this really going on in The Springs? And it’s not difficult to see why everyone is lying. Many speculators stuck with countless properties are facing ruin. Their multi-million dollar property portfolios are just a few thousand dollars away from collapse.

They have to claim that prices are rising, in the hope that if everyone says it enough, everyone will start believing it. This will, eventually, lead to a herd effect. We will all pile in asap, and therefore actually force prices up.

The only way to measure what is really happening in the market is through actual transactions made (not advertised or hoped for). But with virtually no transactions being made, everyone is giving it their best guess – hence so many different reports from highly respected organisations.Where do I sit in the middle of all this?

I am still of the view that things will get worse before they get better – as suggested by Deutsche Bank and James Wolfensohn.

But I might be lying...

1 comment:

  1. It's the same with everything and the same all over the world, whether it's property prices, interest rate, share prices, the recession or anything else. In reality, whether from respected companies or experts in their field, it's nothing but guesswork. Crystal ball gazing, tea leaf reading of the future.

    I keep an eye on the stock market/interest rates in Sydney and before each Reserve Bank meeting the experts give their predictions. Almost every time a third say the rate will go up, a third say down and a third say it won't change. None of them know, they're just guessing.

    The problem is that the media doesn't present it as guesswork but as what will happen as stated by an expert.

    The recent rise in Dubai property prices is an example. All the newspapers carried the story and presented it as demonstrating that the 'correction' was over and prices were on the rise again. Talking the economy up is the job of politicians, not the media, and they should have been more honest in the way the figures were presented.

    Although they were factual figures, they were based on the last three or four weeks' sales, which is akin to asking two people for their thoughts on a subject and using the answers as difinitive research.

    With property there's always a variety of prices; the price the vendor believes it's worth, the price the real estate agent says he can get, the price a buyer thinks it's worth, the real price someone will actually pay. Only the last one has any relevance. Genuine, successful investors only look at that, the rest are meaningless.