It is insane for sophisticated investors to put savings in illiquid, high risk, brick and mortar property in the GCC with volatile rental yields, rules biased in favour of developers, exorbitant service charges, excessive mortgage cost and shrinking high end expat populations in times of recession. This is the lesson learnt the hard way by investors in the GCC property markets, where 40 – 60% drawdowns in a bear market have happened twice in the past decade. I have lived (and survived!) the property market roller coaster and liquidity shocks in the Gulf in 2009-10 and since 2014 by adhering strictly to J.P. Morgan’s advice. Liquidity is like a cab on a rainy night in New York. It disappears when you need it the most.
While capital values, rental yields continue to plunge in the UAE, 2018 was a wonderful time to invest in the world’s best managed, most profitable, most liquid real estate investment trusts (REIT’s) listed on the New York Stock Exchange.
The bellwether FTSE Nareit All Equity REIT index is up 19% in 2018 alone and my must own data center/commercial/logistics property stocks are up 25 – 35% in the past year, at a time when illiquid brick and mortar property in Dubai lost another 15% even as rentals fell but service charges continued to rise. Why did I recommend committing savings to REIT’s on the NYSE since last summer? Four reasons.
One, the yield on the ten-year US Treasury bond plunged from 3.25% last September to 2.50% now, making 5% dividend yields of my chosen REIT’s a no brainer buy me.