Where will the $36 billion in IPO refunds go?

Why do estate agents presently systematically ring up all the 13,000 plus owners of completed property in Dubai?

Is it because they have nothing better to do, or because they have nothing to sell? Surely agents would not be trying to find property to sell unless they were short of property and long on buyers.

Now let us consider the total value of completed Dubai freehold property available for sale, if the owners want to sell it. We have 13,000 units worth perhaps $10 billion on a rough estimate.

This is clearly a very tight market. How many of these units are up for sale at any one time? The Gulf News property adverts are less than before. Will there be enough units on sale if just a fraction of the $36 billion coming back in IPO refunds decides to invest in property? It does not look very likely does it!

Attractive yields

Disappointed IPO investors may think the high rental yields on Dubai property look attractive, and if they all decide to buy then the capital return on Dubai property is going to look very attractive too. For the boom in stocks will then pass to real estate.

Besides the Dubai property law has just been passed, clarifying and codifying real estate ownership in the UAE, so again there is a good reason for buyers who were hesitant to buy now.

What is the alternative for those getting big IPO checks back? Inflation is rising faster than the interest on bank deposits. As for the local stock markets, will they be tempted back after the crash of recent weeks? This might prove a good time to buy UAE stocks, but for how many will fear overcome greed in the face of a fallen market?

Price spike likely

There are a lot of question marks in this article, which could yet prove the undoing of this argument. But the fundamental conditions for a price spike in Dubai property now exist with too much money in pursuit of too few available properties.

That this could happen with a huge volume of property under construction is the type of market conundrum that will fascinate business analysts in the years to come. But supply and demand situations do not get much clearer than this right now.