European realty markets started to drop late last year, while China, India, Russia and even Brazil are also now seeing property prices decline sharply.
Only in the Gulf States are the property markets not only alive but positively thriving.
In Dubai, anecdotal evidence shows 15% to 20% price rises in the most popular areas of the city over the summer, normally a quiet time, but coming on the back of a 78% surge in the previous 12 months, according to Colliers International.
One reason why the Gulf States now have the last property boom in the world is pretty obvious: High oil prices have sent the economies of consumer nations diving into recession while the same high prices sent petro-dollars back to the Gulf.
High oil prices
Oil prices are off their $147 spike of this summer but still stand at very high historic levels.
Gulf economies had not even started to digest $100 oil so even if prices tumble to $50 next year, as Merrill Lynch predicts, alarm bells will only just be ringing.
But the global credit squeeze is beginning to worry developers and local bankers. Banks have lent up to their maximum quotas for real estate this year, and at the same time inter-bank lending rates have doubled pushing up loan costs, and banks are reluctant to lend even to their best customers.
In the mortgage market higher interest rates have pushed up monthly borrowing costs, while the percentage of equity relative to the size of the loan has gone up.
For a real estate market in an advanced country this would be suicidal. But the Gulf property sector is still driven by cash, at least as far as individual buyers is concerned.
In the UAE just 4.5% of GDP is mortgaged as opposed to 20% to 30% in most emerging markets, and well over 100% in advanced economies – one reason for their mortgage busts.
Gulf freehold property sectors are also tiny. Dubai is the most advanced with approximately 30,000 to 35,000 completed units and 160,000 to 170,000 under construction or booked.
This means that the government holds tremendous influence over the sector. It can stop developments, rationalize projects, finance all mortgages and manage the whole sector in a way that embattled economies can only dream about.
So even if off-plan sales hit the wall in the Gulf, the governments are not about to let their plans for diversified, modern economies be derailed.
They are in an enviable position of control – with shareholdings in many key developers and the banks as well as having oil and gas revenues and massive sovereign wealth funds - and can keep the whole show on the road until the global financial crisis is a thing of the past. But this political will is about to be tested.See also:Dubai average price index - prices show continual increasesDubai property laws mark a major step