Mortgage rates in the UAE have now doubled from 2% to 4%. My view on a protracted inflation cycle and a sharp rise in credit risk during the next year as the global/UAE economy slips into recession means that mortgage rates could rise to 7 to 8%, making a mockery of the argument that this is a cash only market with juicy rental yields. When the cost of capital rises so dramatically every asset class gets its valuation slammed and the laws of economics, let alone gravity are not repealed in Umm Suqeim. Fireworks will start when Brent plunges to $50 and wholesale funding markets for banks snap shut.
So will this spectacular bull market in property still continue brokerji? Sirji, I am cruising gently in my Bentley and going to a sexy launch party with Aunty Bunny! Are we on the eve of Lehman once again and is the macro wolf at the door? Sadly, yes. It will be brutal this winter for the global economy and the poor even in the West. I remember Axl Rose’s immortal song November rain which helped me save getting slaughtered in the real estate bubble back in November 2007. “Nothing lasts forever. We both know hearts (risk appetites) can change. It is hard to hold the candle in the cold Dubai November rain”.
There is one problem with liquidity in New Dubai, it is like a cab on a rainy night in New York . It disappears when you need it the most. J.P. Morgan said this after his off-plan punt went sour. I was once a yuppie MBA in a New York bank in the 1990’s. MBA degree gave me zero wisdom but a succession of money spinning job offers on Wall Street and its true value lay in its title. Master of Bubble-ology and Amnesia (MBA). So I seek refuge in the old adage that there are none so blind as those who refuse to see or those who just made a down payment on a garma garam hot project by a friendly developer whose balance sheet is leveraged leprosy.
Crystal ball gazing again Matt? Bien sûr. Liz Truss will be elected the next leader of the Tories and thus beat Rishi Sunak to become the 3rd women Prime minister of the sceptred isle. Her selection will be made by 160,000 Britain’s 97% just happen to be white. Sorry Rishi baba, why not fly to India and position yourself to beat the Yogster with the UP sacred cows as Modi’s successor and even earn bigger bucks than Sasurji. A brown skin Tory PM in 10 Downing Street is statistically not possible when the voting is done by 65 year old white men who happened to live in the geriatric Sloane Ranger enclaves of London. A brutal winter awaits Britain akin to Jim Callaghan’s winter of discontent that gave the world Maggie and monetarism. So PM Truss will then call for a general election next year and be defeated by Labour in a landslide while sterling plunges below 1.05. Land of hope and glory.
Also published on Medium.
