Warren Buffett is not the first name that comes to mind when we talk of investment gurus who have made a fortune by taking outsize risks. Instead, Buffett and the empire he built through his holding company, Berkshire Hathaway, chose to take measured risks that a particular investment exposure would pay off. And the Omaha guru does it with the longer term in mind. Whether it is pumping $23.58 billion into the food giant H.J. Heinz or putting $5 billion into Goldman Sachs, it is all about trying get an optimum yield on those dollars spent.
So, Berkshire Hathaway’s real estate brokerage firm’s foray into Dubai signals a vote of confidence in the property market here. Sure, there are fundamental issues that have to be addressed by stakeholders — the worry over freehold oversupply depressing property prices and extending a soft rental market; the questions hovering over developers’ financing property purchases directly and possibly setting themselves up for a credit squeeze later. But, if handled right, none of this can irreversibly dim Dubai real estate sector’s prospects as an investment destination.
The belief remains that there are still international investors who will want to get a line on the steady returns that a property exposure in Dubai can fetch. This is what Berkshire Hathaway HomeServices will want to offer in its narrative of why someone should look at Dubai.
For the wider property market, this could be the lift in sentiments needed. Because it is easy to be distracted by the ebb and flow of market dynamics. Dubai’s property market has been passing through a soft phase since mid-2014. But plenty has been achieved on other fronts within the real estate space — projects are getting completed, developers with a firm grasp of market requirements are still selling plenty, and end users are moving into their new homes. The market cannot operate based on whether property values or rents are falling. After a fairly indifferent 2018, there are more people buying homes in Dubai, Abu Dhabi and Sharjah. The laws are being amended to make the sector as transparent as possible to international investors.
The market will continue to have peaks and troughs. Market cycles are like that. But there is money to be made in such cycles — and Berkshire Hathaway has done that consistently. And it could do so again with the move into Dubai. Buffett seldom gets it wrong.