Credit Crisis and the Real Estate Crash

PRLog (Press Release) – Nov 02, 2008 – It appears that a global recession (some say depression) is well on the way as the credit crisis hits stock markets and banks all over the world and property prices are falling rapidly in well established markets such as the UK and USA as well as Europe. Many analysts are even predicting a drastic price correction in the Middle East where Dubai has led the way to a HUGE property boom since 2002 but this seems to be leveling out with an expected price correction as a HUGE surplus of properties hits the markets at the end of 2008 and 2009.

Investors, both large and small, have profited greatly from property price escalation in these last few years but as the recession closes in, many are wondering what to do next. Where is the next property hot-spot? Should investors hold on to their properties through the price crunch and try and see it through to the other end, several years away? Or should they take a hit on their profits and try and get out? Many investors have borrowed against their assets and are facing uncertainty as the value of the property falls below the borrowed amount (negative equity).

The smartest investors sold most of their property over a year ago and have been waiting for the right opportunity to make itself known. Many of them have now started buying property in Islamabad which is facing a crisis of a different sort. The political landscape here has changed drastically over the last year. Dictatorship is out and Democracy is in. The civilian government seems to have it's hands full with many challenges that are facing the nation including the inflation, energy shortages and the ongoing war on terror. Suicide bombings have become more and more common and the recent attacks in Islamabad have had a devastating effect on the local population.

We seem to be in a holding pattern right now in Pakistan. Not a lot is happening on the political front. Electricity load shedding has decreased drastically bringing some relief to businesses and consumers.  Clocks are to be resynchronized with the world time zone once again from the end of October. The weather is changing and Air Conditioners and Fans are no longer being used in Islamabad.

The Property Market is moderately bouyant with lower priced property being bought and sold. New property developments in the main sectors of Islamabad are still selling well. There has been an increase in the number of enquiries for land. It seems that during times of financial crisis, people still recognise that land IS the safest form of investment.

The Global Credit Crisis is in full swing and warnings are being issued daily all over the world about the economic meltdown. Scenes of the depression in the early 1900s are being replayed by many.

Real Estate agents in Dubai who have been working in the real estate sector  for the past few years are telling us that no-one is buying property in Dubai anymore. One of the larger companies with 30+ agents just sold 4 properties last month !!! Expect many of the real estate companies in Dubai to run away as the market crashes.

Many buyers are apparently defaulting on their installments, preferring to lose the 5% deposit they have already paid rather than risk paying for a hugely over priced property, just before a crash.

Large developers are facing rumours that they are in financial difficulties. Thousands of properties are on the market for resale at very low premiums, zero profit or even at a loss on the purchase price. The authorities in the UAE have been making changes to the visa regulations and real estate laws and many of these are having a detrimental effect on the market there. Abu Dhabi, Ajman and Ras Al Khaimah seem to be facing similar difficulties in their real-estate sector.

The currency markets are reacting violently on a daily basis and HUGE swings are being seen in major world currencies on a daily basis. The UK Pound Sterling has dropped from close to 2 US Dollars per GBP to around 1.5 US Dollars per GBP (almost 25% in a few days !!). The Rupee seems to have dropped as far as it was going to for the short term and has remained largely flat for a couple of weeks at around 82 per USD. Australian Dollar is at 5 year lows against the USD.

If anyone has any good news to share...NOW would be the time!!!