Is it best to buy UAE stocks or property as an investment?

Now the presumption behind this headline is that the UAE economy is now in a recovery phase after the recession that followed the global financial crisis that was considerably amplified by a local property crash at the same time.

Other articles on this website have demonstrated that it is, particularly when you consider the additional oil revenues from the chaos of the Arab Spring and the influx of wealthy new residents and tourists as a consequence.

High economic growth

Going forward the UAE’s fundamentals of high economic growth will pick up and deliver a second oil boom for the nation. It will not be the same as the last boom. The UAE has enough real estate to last for a decade or more and is still finishing off many buildings that started in the boom years.

But there will be money to be made by investing in companies whose profits expectations have been severely depressed in the crisis and whose profit outlook will now surprise to the upside. Stock prices are driven upwards by profits and these are returning.

Indeed, you are most likely better buying stocks than property in the UAE. For one thing the stock market crashed longer ago than real estate. The UAE bourses crashed in early 2006. Real estate crashed in late 2008, almost three years later.

Logically then you would expect the stock market to recover well ahead of real estate. And indeed property pundits think it will take two to three years for the market to bottom out and digest the oversupply now be dumped on to the market.

Buy now!

The ArabianMoney newsletter agrees and has some innovative ideas for how to invest in UAE stocks this summer in the latest edition (subscribe here). We will also be travelling half-way across the world to Vancouver again this month to promote the merits of investment here to North American private investors at the annual Agora Financial conference.

This is probably the best moment to invest in UAE stocks with prices close to an all-time low and with a lively autumn to follow. But you might still have to be patient and wait for the Arab uprisings of this year to reach their conclusion.

Still sat in the safe haven of the UAE that is only an annoyance and your bigger risk would be being out of the market when it finally takes off. These stock markets have small free floats and can rise dramatically once demand returns.

That said Dubai villa prices are up in the best areas and a leveraged investment in this market might well perform as well as local stocks without margin, so there will be exceptions to this general rule about stocks rising first.