Investing in Dubai?

A question from Yahoo! Answers:

thinking of investing in real estate in dubai. any comments anyone?

The basic principle of real estate investing is the same everywhere; the operating yield must exceed interest rate used for financing. The problem is that right now, rents must be at their historic highs and vacancies, at their historic lows; see if you can find any information on what happened to rents and vacancies in Dubai between 1985 and 1998; this will give you some idea of what’s going to happen to your property when oil prices fall.

The additional local quirk is that there are no mortgages in the Western understanding of the term. There may be three possible arrangements, (1) the lender acquires the property outright and sells it to you on an installment plan, (2) the lender acquires the property and you gradually buy him out, and (3) the lender acquires the property and leases it to you; title is transferred to you at the end of the lease term. In all cases, the lender’s name gets on the title. You should check if this is going to create problems for early disposition.

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