It has been months since the Covid-19 outbreak begun, and many of us are still grappling with the whiplash speed at which our lives have been disrupted.
The present is grim, and the future looks bleak and all we can do is brace for a new normal.
World economies are struggling with unemployment and every asset class has gone through several rounds of violent and volatile re-pricing.
The World Bank mid-year baseline forecast envisions a 5.2 per cent contraction in global GDP in 2020, despite the extraordinary efforts of governments to counter the downturn with fiscal and monetary policy support.
But amidst all the doom and gloom is the silver- lining of opportunity.
The simple, fundamental principle of investing dictates that you should buy low and sell high. It makes intuitive sense to sell when stocks are dropping and to buy when things are turning around.
Investing is all about not pushing that panic button and holding on for long term.
So should you then look at healthcare bonds, invest in gold, begin exploring alternatives such as cryptocurrencies?
Historically, real estate has demonstrated an enduring appeal. When calamity strikes, markets fear the worst. But once the dust clears and opti- mism returns, real estate prices have bounced back to where they were.
The 2008 global financial downturn saw property prices plummet 60 per cent in Dubai with many projects being put on hold or shelved.
The real estate sector’s contribution to real GDP had slumped to Dhs92.7bn in 2009, but with factors such as continued government spending on infrastructure, and visitor numbers increasing, it rebounded to Dhs95.1bn in 2010.
During a crisis, you can expect panic selling by those who need to raise liquidity in a hurry. But you must rely on rational analysis, not emotions, to guide your investment decisions.
Dubai’s long-term fundamentals have always been strong, with a growing population, excellent infrastructure, world class healthcare and education as well as an attractive tax base.
In other news: Where to invest in Dubai right now?
Affordability within Dubai compared to similar global cities is excellent and it should be noted that the UBS Global Real Estate Bubble Index marked Dubai as “fair valued” compared to cities like New York, London and Paris.
Real estate can play a major role in the region’s recovery even during a crisis.
There is pent up demand in Dubai’s property market and real estate rebounded last summer with buyers looking to capitalise on record low prices.
There has never been a better time to take advantage of the market.
Investors need to be smart and identify specific assets, predominantly villas in prime locations, that are currently undersupplied.
As per JLL’s Global Real Estate Transparency Index, Dubai is one of the ‘global top improvers’, with a host of government initiatives, enhanced regulatory procedures and an increasingly dynamic proptech sector.
It is also among the world’s most lucrative locations for investment, hovering over 7 per cent gross rental returns on average.
Initiatives such as the introduction of online property transfers from Dubai Land Department, the UAE Central Bank’s economic stimulus package and favourable payment options from developers have supported the market during the crisis.
We have also seen the announcement of the retirement visa programme that has created a strong case for the UAE to become a new luxury retirement destination, opening up the country to a new kind of investor.
The UAE’s bilateral agreement with Israel has also opened the door to new partner- ships and potential investment opportunities across all market segments.
As we push through the pandemic, there is denitely light at the end of the tunnel. Strong fundamentals will sustain the demand for real estate in the UAE.
They have always supported the market even during volatile periods, and will continue to support price levels going forward.
PNC Menon is the founder and chairman of Sobha Group