The Dubai Financial Market traded at 55% below its all-time high on the day this article was written, and started to its long fall almost exactly one year ago. Yet the local real estate market is still enjoying a boom which is stronger than ever following the recently decreed new Dubai property law.
If you turn to the emerging market business cycle model of Dr. Marc Faber, the celebrated investment guru and AME Info columnist, then a real estate bust will follow some 12 to 18 months after the peaking of a emerging stock market. However, it may be different in Dubai. In the classic model a stock market crash will drain liquidity from a market, and bankrupt stock market investors will begin to sell property at fire-sale prices and bring real estate tumbling down. This does not appear to be happening in Dubai, quite the reverse. Instead the new property law - which finally makes it 100% legal for foreigners to own real estate in Dubai - has resulted in a new inflow of cash into the market. For the time being this has more than compensated for the possible impact of the stock market crash, which is what a 55% fall in the DFM index must be termed.
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