Will Dubai property bounce back in 2012 as London developer Nick Candy predicts?

Despite losing money in London for the past two years in a very tough property market one of the famous Candy brothers predicts that Dubai real estate will bounce back in 2012.

The market made an unexpected recovery last year with the Arab Spring bringing an influx of exiles, expatriate families and businesses into the emirate. Completed villa community prices gained 15-25 per cent though stabilization was more the name of the game for apartments.

It is therefore not such a wild prediction for party-loving Nick Candy to see this recovery continuing. The Arab Spring protests, civil wars and revolutions are still happening. Syria is in uproar and the smart money still leaving. Ditto Egypt and Libya for that matter. Yemen is in chaos. Bahrain is still seeing some serious protests.

Moving to Dubai

So rich Arabs continue to pack up and move their families to the safety of Dubai. Multinationals do the same for families of expatriates. And banks that used to have representative offices in Dubai and their main operations in Bahrain are switching that around.

There is also a steady inflow of the super rich into Dubai from all over the world from Indian billionaires to UK expats facing excessive tax bills. More of them are making their home now in Dubai than before the crisis of late 2008. That was reflected in luxury car sales last year which topped the previous record year of the real estate boom.

However, the huge oversupply of property of pretty much every type and budget is the balancing factor. Around a third of office accommodation is vacant and 15-20 per cent of residential real estate. That said the population of Dubai is growing annually by as much as 10 per cent so in theory this oversupply should be quickly taken up.

Supply and demand

Indeed, that is why the market could move from stabilization to price rises pretty quickly. The demand side of the supply/demand dynamic is much stronger than often assumed by foreign observers. Nick Candy may well have done his homework on Dubai.

A more credible threat to the Dubai real estate market in 2012 is the oil and business embargo just imposed on Iran by the European Union and Australia. If this ends with military action in the Strait of Hormuz that jacks up insurance for container ships to uneconomic levels then the status of Dubai as a trading hub will be compromised, quite apart from scaring the tourists off.

All the same nobody thinks there is much physical danger to the infrastructure of Dubai because any engagement would likely be short and many miles offshore. The winning party is not in any doubt either. In truth that sort of hiatus might simply be a good buying opportunity.

And on the other hand, the higher oil prices from a stand-off with Iran will keep the UAE very solvent in 2012 during a difficult time for the global economy, with high oil prices just one of a long list of problems. The Candy brothers started by buying one flat in the UK in 1995 and have since become immensely rich global property developers. They have not got much wrong in that time!