Editor’s note: This article was first published in July 2014; the Dubai market fall, Arabtec’s share price drops and the annual rise in house prices are figures from that month, and the events described were current then.
Dubai’s benchmark index on the Dubai Financial Market plunged no less than 5.99% this Sunday. Once again, the trigger for this stock market slump appears to be doubts about the emirate’s property bubble.
Arabtec Holding Co, the largest property developer in the United Arab Emirates, fell 10% after its shares were suspended from trading at the end of last week.
Dubai has been one of the most profitable markets in the world over the last few years. House prices have been rising by 31.5% a year, according to Business Insider, and even so, people in Dubai do not think they are in a bubble. They believe demand for property keeps growing and that the economy is still strong.
The thing is, we are seeing the same madness we already saw practically all over the world before the 2008 crisis. The latest example is the construction of what will be the world’s largest shopping centre and the planet’s first climate-controlled city. Experts say Dubai has a huge bubble that is about to burst. In fact, the problems property developers are facing today could be a sign of what is about to happen.
Arabtec Holding fell 59% in June.
There are many open fronts on the horizon, such as fears of a bubble in China and in Dubai, the slowdown in emerging markets, and Wall Street indices at all-time highs.
We are at one of those critical moments when we need to keep a very close eye on our equity portfolio.
See also: Jeffrey Saut: markets are bracing for a 10–12% correction
Featured image: Fabio Achilli from Milano, Italy, CC BY 2.0, via Wikimedia Commons.
.jpg){kind=link}