Role of Banks in the Real Estate Bubble in Dubai - Research Paper Example

A property bubble or bubbles in real estate is a kind of economic bubble which takes place occasionally within local or international markets of real estate (Renaud, 2012). It is determined by rapid raises in real property valuations like housing to the point where they reach levels that are unsustainable and then decline. When one is a buyer or seller of real estate, it is important to consider the value of the market of this business since value changes in the dissimilar duration of time. The decline within the developing business comes due to a lot of causes.

Correspondingly the real estate’ market is experiencing a decline due to a number of reasons which include; the most significant decline point that needs to be noted is the elevated real estate’ rates (Al Bawaba, 2008).During the past decades, a lot of people spend their capital on real estate and got profit although currently, this investment is somehow not advantageous as the real estate value is quite high that the buyers are not found within the market resulting in the real estate decline (Zembowicz, 2009).

Not merely in this market but also in every business when the cost of things is too high buyers are not available and the decline is the business’ future. Therefore real estate which at some point was considered the safest venture is no longer regarded as good. This reduction in buyer leads to a decrease in real estate’s rate.As stated by Mantell (2010), the government of Dubai declared requiring its creditors to corporate and freeze debt repayment and said that in case the proposal was to be refused, it would sell the real estate assets.

He also stated that despite the fact that Abu Dhabi is the wealthiest emirate in the UAE, it extended a loan worth 10 billion dollars with the aim of covering some debts and assisting Dubai to resolve some of its problems (Mantell, 2010). Watts urges that Dubai had conducted an agreement with the majority of its bank lenders to restructure a debt of 23.5 billion dollars with a remaining of 14.4 billion dollars (Watts, 2009).