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No more property market speculation for a generation
So says Nobel Prize winner Paul Krugman, who believes that the current real estate crash was “one hell of a lesson” for greedy investors.
May 26, 2009 3:52 by Jonathan Howell-Jones
The property market speculation that fueled growth in Dubai and around the world is unlikely to return for at least a generation, according to Nobel economist Paul Krugman. Speaking at the Megatrends conference in Abu Dhabi, he said, “If we wait a couple of generations, we might have it happen. I think this has been one hell of a lesson for people who thought that real estate prices only go up.”
Krugman acknowledged that the crisis is a serious one, with fallout globalized and various property markets unlikely to improve in the near future. “You will find there were real estate bubbles all over the world, and they have all come to grief. I find it hard to believe that, for at least a generation, we’ll see anything like this happening again.”
The Dubai property market has been hit especially hard, despite late attempts last year to minimize the effects of investor speculation. In fact, UK property broker Frank Knight has listed Dubai as the second-worst performing property market over March 2008 to March 2009 (with Latvia the worst performer). According to leaked figures compiled by the Dubai Real Estate and Regulatory Authority (Rera) last year, a range of development projects with a combined value of about $75 billion has now either been shelved or postponed.
However, Krugman also noted there were some signs of recovery, and that oil prices are likely to stabilize and improve as demand is still consistent with oil prices remaining inelastic. “As a citizen of the world, I can’t wait for this to be over,” he said.
Mohamed Ahmed Bin Abdulaziz, director general of the UAE Ministry of Economy, also spoke at the conference. He claimed that the current crisis has “bottomed out,” and that the UAE has already initiated action in the property sector.