Dubai property prices fall 41%
Less boom means less bust
Land and resources make all the difference in the business cycles. We trim, blend, and append three 2009 articles from: (1) the Christian Science Monitor, April 25, on states doing OK, by Daniel B. Wood; (2) MarketWatch, Apr 28, on home prices by Rex Nutting; and (3) BBC, April 28 on Dubai.
by Daniel B. Wood, by Rex Nutting, and BBC
While the US economy struggles, ten states are doing OK
The economies of 10 states are outperforming the US economy as a whole, according to a study by the Nelson A. Rockefeller Institute of Government.
The two biggest reasons are that most of these states have oil and natural gas; through much of 2008 those prices rose. And their real estate prices were not pumped up into the stratosphere.
The ten states (Alaska, Wyoming, Louisiana, Nebraska, Texas, Iowa, New Mexico, Utah, Oklahoma, and South Dakota) did missed the real estate boom seen in places like California, Arizona, and Nevada -- and therefore have not gone bust to the same degree.
Whereas in 2001, only about one percent of the nation’s housing loans were in the sub prime category, the national average now is 5.5%. Nevada is at 12.5% after dropping back from 13%. California and Arizona are in the 8% range.
A lower cost of living makes a difference too. “Insurance, fuel, food, recreation cost less compared to other larger markets outside of the Midwest,” says realtor Doug Burnett in Des Moines Iowa. “That is more attractive to employers hiring workers and is a factor when someone is deciding to stay put or move away.”
JJS: The underlying cause is demand (not supply, since the supply of land is fixed). Demand for land and demand for energy. Both are natural resources, needing nobody’s labor to exist.
Where people want to live, population grows -- not in the interior so much as along the two coasts. There homes cost more because home sites cost more. Globally, when many people’s standard of living rises, they demand more fuel.
More than just a few lucky ones but everyone could benefit from this “rent” spent for land and energy. Where government recovers the socially-generated value of nature, there it can lower, even eliminate, taxes on buildings, sales, and earnings. In such geonomic jurisdictions, people produce more while their economy keeps off the roller coaster, instead gently climbing and gliding.
A couple recessions ago in Australia, while neighboring towns were suffering losses of business, jobs, and investment, the towns that taxed not buildings but land did not just suffer less or break even, they actually gained new industry.
Geonomics is system that has worked wherever tried. Perhaps American are ready for what works, as their economy finally sights bottom.
Home prices falling at a slower pace
Home prices fell sharply in February, but at a slower pace than in January, according to the Case-Shiller home price index. Home prices in 20 major cities fell 2.2% in February after a record 2.8% decline in January.
Prices in 20 cities are down 18.6% in the past year, compared with a 19% drop in the 12 months ending in January. It was the first time in 16 months that the year-over-year decline in prices did not set a record.
Prices in the least volatile market -- Dallas (an interior city) -- are down 4.5%. Prices in three cities -- Phoenix, Las Vegas and San Francisco (on or close to the coast) -- are down 30% or more in the past year.
Home prices are down 30.7% from the peak in mid-2006. From their peak, prices are down at least 40% in seven cities.
With prices down, millions of homeowners are finding themselves owing more on their house than it is worth. They cannot sell for what they owe, and they cannot refinance their loan. They cannot borrow against their home to finance their consumption.
JJS: What’s that say about an economy where people must move frequently and stay in debt to get by? Elsewhere, formerly fast-growing cities match the collapse of America’s fastest depreciating cities.
Dubai property prices 'fall 41%'
Property prices in Dubai plunged 41% during the first three months of this year from the last quarter of 2008, said global real estate consultancy Colliers International.
The firm's report measured property prices in parts of Dubai where foreign workers have been allowed to buy homes since the market was opened up in 2002. The 41% drop in prices between January and March followed an 8% fall in the previous three-month period.
Speculators -- people who had bought property in Dubai as an investment -- had already left the market.
Dubai is one of the seven states that make up the United Arab Emirates. Ruler Mohammed bin Rashid Al Maktoum, seeking to diversify the economy away from its diminishing oil reserves, bet on real estate and launched a construction boom.
JJS: Dubai built the latest “world’s tallest building” Every time that record is broken, it heralds land prices have peaked and recession must ensue. The classic example is the Empire State Building and the Great Depression. Economists call it the “Erection Index”.
Jeffery J. Smith runs the Forum on Geonomics.
Economic deja vu all over again
DC fixer-uppers become tax ruins or renewals?
Economist calls bottom in 2010, based on US cycle
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