Warren Buffett eyes Dubai real estate as prices collapse 25% since their peak of 2015.

The real estate affiliate of billionaire investor Warren Buffett’s Berkshire Hathaway Inc recently said that it will expand its brokerage operations into the Middle East by opening an office in Dubai, reported Reuters April 28, 2019.

“Warren Buffett’s Berkshire Hathaway Inc recently said that it will expand its brokerage operations into the Middle East by opening an office in Dubai”

reported by Reuters

Warren Buffett eyes Dubai real estate and some are asking has the Dubai real estate bubble burst and is now the right time to acquire real estate in the region?

Warren Buffett has a saying about the stock market and investing in general: “Be fearful when others are greedy and greedy when others are fearful”.

Warren Buffett eyes Dubai real estate as a value investor; he looks to purchase assets that are below their intrinsic worth but have the potential to make money.

Has the Oracle of Omaha suddenly become greedy to acquire as much Dubai real estate at what could be a bargain discount?

The frugal billionaire with a personal wealth of $84.9 billion has deep pockets and the means to furnish his portfolio with Dubai real estate.

Be fearful when others are greedy and greedy when others are fearful

WARREN BUFFETT

Perhaps it would be more accurate to say Warren Buffett eyes Dubai real estate but the billionaire investor isn’t all in

In other words, Warren Buffett is not betting big on the come back of the Dubai real estate. Here is why.

Berkshire Hathaway is expanding its brokerage operations into the Middle East by opening an office in Dubai. Put simply, Warren Buffett plans to profit from the troubled Dubai real estate market by taking a cut in the transaction activity. So Warren Buffett is not investing his fortune in Dubai Real Estate he is merely opening another real estate broker shop.

So Warren Buffett is hardly all in on Dubai real estate, bearing in mind that two brokerage offices in Dubai are small potatoes for the multi-billionaire Berkshire Hathaway fund.

The Berkshire Hathaway Home Services Gulf Properties will be led by Chairman Ihsan Husein Al Marzouqi and Chief Executive Officer Phil Sheridan, a company statement said. They will have a team of 30 advisers and support staff.

“Dubai has been a top priority for our network’s global expansion as it represents innovation among world leaders and is a top global center for trade, logistics, tourism, and finance” said Berkshire Hathaway Home Services Chairman, Gino Blefari.

“Investors can expect Dubai residential property prices to fall another 5-10 percent this year, according to S&P Global Ratings”

Warren Buffett eyes Dubai real estate, with a brokerage expansion in the region, despite a downturn which has seen property prices fall by more than a quarter from a peak in mid-2014

The Dubai real estate downturn has hit the profitability of the emirate’s top developers and has forced a few high profile construction and engineering firms to cut jobs and halt expansion plans.

So Warren Buffett eyes Dubai real estate with a brokerage expansion shouldn’t be construed that the Dubai real estate market has bottomed out.

Investors can expect Dubai residential property prices to fall another 5-10 percent this year, according to S&P Global Ratings. There is a glut of properties on the market and it could take until 2020 before this mismatch between supply and demand is addressed.

During the last financial crisis house prices in Dubai plunged by more than 50 percent from their peak in 2009-2010. Dubai was then forced to seek a $20 billion bailout from oil-rich Abu Dhabi to avoid a debt crisis, which had threatened to force some state-linked companies to default on billions of dollars of debt.

Warren Buffett eyes Dubai real estate at what could be a pernicious time for the regional property market

Some investors think that the current 25% drop in Dubai real estate prices last year is just the beginning.

“Entire buildings could become ghettoized as many owners will just walk away from properties and stop paying maintenance fees. It could become a blood bath, making the 2009 price correction look a minor event

Could we see Dubai real estate fall by 75%?

The most bearish investors would agree, believing that entire buildings could become ghettoized as many owners will just walk away from properties and stop paying maintenance fees. It could become a blood bath, making the 2009 price correction look a minor event. So investors are arguing that a Dubai real estate crash is on the horizon, it will happen again. The broken promise of no taxes only to introduce a sales tax has frightened away the rich and their accountants, many of whom have already left for Mauritius.

Other voices are saying that Warren Buffett eyes Dubai real estate at an opportune time

“As capital values softened by an average of one percent per month for the last 16 months, a six-month streak in buying activity has been observed for both off-plan and ready homes” Haider Tuaima, head of Real Estate Research at ValuStrat, told Khaleej Times on Tuesday.

“Currently it’s a buyers’ market” Tuaima said. “Depending on location, quality, ready or off-plan, mortgage or cash payments, etc., ready home buyers have an upper hand in negotiating the asking price. Developers are also offering very competitive payment plans for off-plan properties that span beyond handover date”.

So Warren Buffett eyes Dubai real estate by investing in another broker office. But perhaps a true sign that Warren Buffett bets big on real estate will be when he actually invest some of his personal fortunes in the local property market.

TRADING SOFTWARE

Dan Loeb targets Sony. Dan Loeb is an activist investor and founder of Third Point, which oversees about $14.5 billion in assets.

Last year the activist investor viewed Campbell soup as a bargain when Third point reported that the soup maker could fetch a takeover value of $52 to $58 per share.

A year later and the activist investor Dan Loeb targets Sony

Dan Loeb's activist hedge fund Third Point is raising an investment vehicle to generate between $500 million and $1 billion so it can continue to buy Sony shares, according to a recent report in Reuters.