No bubble says Emaar CEO

Q. Do you see a risk of a bubble in the Dubai real estate market?

A. I doubt very much that there is a bubble developing: look at the demand for property here. The number of properties that have been sold over the last couple of years is but a fraction of the number of people who could potentially buy property in Dubai.

Dubai has an expatriate population with purchasing capability of about 300,000. Of them, about 30,000-35,000 have bought property so far. At the same time, the population of Dubai in the income bracket that could buy is growing is at about four to five percent, although the total growth rate is much higher.

This is a segment of the population that is growing rapidly. Consider that less than 10 percent of them have bought, and that many of the newcomers to Dubai are much more ready to buy property.

These people are coming in at a different income level; they see the rental yields here and can take advantage of the situation. They can take a position in Dubai. In the context of all this, the so-called bubble that people are talking about has no basis.

Q. What, then, would be a sign to you that the market was overheating?

A. One of the early warning signs would be if rental yields started dropping off, which would tell me that people weren't willing to pay such high prices. But that's not happening. That was what was forecast by some analysts a couple years ago but, of course, it didn't happen.

Q. Do you see a bubble developing in the US market?

A. It really depends on what you read and whom you listen to. There are people who feel that the American market is so well regulated that the chances of an implosion in the property market there are very, very low.

One could agree with that analysis or disagree with that, but the fact remain that the US market is highly regulated through its financial institutions. The US government does not directly control the property market, but they have control over it through the financial institutions.

Q. But you could have said the same thing about the US stock market and tech stocks a couple years ago.

A. Yes, but the tech market is different: retailers, taxi drivers, everybody was in the tech market. That's not the case with the property market, which is much more institutionalized.

You've got retail investors, who may have a couple of homes for rent; you've got homebuyers, who are generally one-home owners. But the bulk of them are institutional buyers, and these guys are pretty well regulated through their access to funding.

In the tech market, you had indiscriminate buyers, margin investors, stuff that you don't see happening in the property market.

Q. That leads to another point: the lack of regulation in the Dubai market compared to the US market.

A. The Dubai market is going through a period of growth, and we're constantly putting in place new regulations. There's a lot of strong self-regulation in the market as well.

We try to curb the development of speculation by insisting that a property can't be sold or transferred by a buyer unless he has put down a certain amount of cash towards the purchase. Dubai does have the regulations in place to be sure that the property market remains healthy.