Dubai Property Market: Save cash to seize next opportunity
The latest Fitch report on Dubai property talks about certain speculative projects and developers, analyzes the situation on oversupply, and yet also states that banks and developers for the most part are well capitalized to weather any price correction.
This flies in the face of the traditional heuristics that people apply when they state phrases such as ‘cash is trash’ or ‘buy the dip’. Clearly, cash is needed to capitalize on any prospects of asset defaults, in order to capitalize on such opportunities. Yet any portfolio that is fully invested and buys into any dip will not be able to take advantage of such scenarios.
This implies that any sort of first principles approach by definition means that an individual’s balance-sheet should not only have some cash (and more importantly cash flow) but that this cash pile should increase when there is a sense of price inflation.
Short on cash
Otherwise, the inherent assumption is that prices would rise all the time, and there would be no concept of a price bubble. Yet, we have experiences from the world (Japan, China and US real estate are the most prominent examples) that when prices get detached from fundamentals – which occurs due to oversupply pipelines as well as stretched balance-sheets – prices fall.
Playing the patient game with investing
The same effects are starting to be felt in the US residential too in some states, particularly in the luxury markets. Why then is not obvious that the supply pipeline is a key barometer, dissected by category, size, views and other factors?
Investing is about patience rather than clichés. It’s about waiting for long periods of time to find the right opportunity but to be aggressive when that opportunity does come along. This can only be actionable if there is cash on hand to begin with.
This is as obvious a heuristic as the oversupply variable, and yet all too often, gets lost under the guise of jargon. Where every new launch is treated with the same level of breathtaking wonder as the last.
To be sure, there is no taking the marketing away and the lines do get blurry when the decision is being made to purchase one’s own residence where emotions often take over.
Yet in investor-dominated markets, just as in business, there always needs to be cash on the table, for that is the only way to capitalize on asset mis-pricings.
Looked from that perspective, for the thinking investor, rising cash piles is necessary prerequisite for long-term success the more prices rise. Investors would do well to look at the Fitch report from that lens.
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Source: Gulf News
18th June, 2025
