By CCN.com: Billionaire investor Warren Buffett has announced plans to enter Dubai’s real estate market. His company, Berkshire Hathaway, is surprisingly eyeing an expansion into Dubai at a time when the region’s real estate market is slumping.
Ever since the oil slump of 2014, Dubai’s economy never fully recovered.
Prices have reportedly fallen by 25% in recent years and remain sluggish. Their main driving force, expatriates, started leaving the country in search of greener pastures as businesses closed shop.
The gap they left in the real estate market caused values to decrease significantly.
Worse, 31,500 homes were built in 2019, more than double the city’s annual demand over the past half-decade.
Dubai’s property market hasn’t rebounded as expected, defying all predictions with a prolonged slump. Jones Lang LaSalle forecasts a further 5%-10% decline this year .
Berkshire Hathaway has struck an agreement with local firm Gulf Properties. With vacant property across the region, Buffett sees an ideal opportunity to take advantage of flagging real estate prices. According to Phil Sheridan, who will be at the helm of the new venture, Berkshire Hathaway’s expansion into Dubai is part of a long-term plan to thrive in the Middle East. He reportedly stated :
“It will not be about us only trying to get U.S. buyers interested in Dubai or Abu Dhabi. There were 16,000 overseas buyers acquiring property in Dubai between January to June 2018 for $10 billion. There will be more of them, and that’s whom we will target”
Berkshire Hathaway is seeking to connect various buyers and sellers around the world by setting up an office in the Middle East. This should ultimately make their Dubai venture a success.
Warren Buffett is rightly considered to have the required mindset to invest in turbulent markets for future profits. Berkshire Hathaway has outperformed the S&P 500 10 out of the past 13 years .
While the markets are in a state of flux in Dubai, the city has undergone a population boom over the last decade. Furthermore, Dubai remains one of the fastest-growing cities globally with a growth rate of 10.7% annually. Dubai’s population is estimated to surpass 2.8 million in 2020 and reach 3.4 million by 2030.
With such a rapid growth rate, the expected demand for real estate will naturally rise, normalizing supply and demand relations for the Gulf nation.