Chris Monsour
Chuck Stull
Economics of Global Travelers
7 May 2014
Link to Article: http://gulfnews.com/business/economy/dubai-needs-to-be-tough-on-property-speculation-1.1329036
Dubai needs to be tougher on property speculation. The quick turnaround, or real estate flipping, of properties in the UAE's jewel city of Dubai has caused the Dubai property market to overheat. Prices for general commercial and residential real estate in Dubai have skyrocketed by 20% in the last two years. The profit opportunity of building up hurting properties and selling them for a profit within a year has made the property market hard to enter for newcomers to the city, which in the end hurts the economy of Dubai. The government considered putting in a higher LTV (loan to value) rate from banks to borrowers, as well as increased transaction fees and penalties for those who flip their real estate within one year of its purchase. Much like our studies on supply and demand, the demand for property in Dubai was simply too high, which created a lack of supply. The occupied properties were then built up and transformed into expensive assets, which in turn created a lack of demand from the middle class who could no longer afford the once attractively affordable properties. I believe higher transaction fees will solve this problem as well as an increase in the real estate development of multi-unit housing in Dubai to accommodate more of the middle class citizens and ex pats. The rich landlords cannot simply hoard the city for themselves.
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