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Dubai Debts Did Have Affect On Property Market
February 4, 2010Article by Ray Withers
As proof — if anyone needed any — that the Dubai debt debacle affected the Dubai property market, apartment prices in Dubai have fallen 4.3% in the final quarter of last year, compared to a 7% rise in the third quarter.
There had been some within the industry who had said that the affair wouldn’t affect the property sector, including Abdul Majeed Ismail Al Fahim, chairman of Dubai Pearl, speaking to Arabian Business who said that the debt restructuring by Dubai World would not affect the real estate sector because “restructuring is such a normal word”.
Most people however understood that confidence was always going to be the biggest hurdle Dubai property would have to overcome, and that a worry over the debts of state-owned Dubai World, which owes some 40 billion dollars could only remind people of the state of Dubai’s affairs and thus knock the confidence that seemed to be returning to the market.
For those that don’t know: it all started when Dubai World, one of Dubai’s largest developers asked its creditors for a debt freeze. Note the lack of the normal word restructuring.
This immediately set alarm bells ringing in stock exchanges, markets and board-rooms around the world; there had previously been little worry over Dubai’s level of debt, because it had always been taken for granted that Abu Dhabi — aka the rich uncle — the largest and most wealthy emirate would cover them should things go wrong. This was the first indication that this was not guaranteed; as Abu Dhabi decided to teach its reckless nephew a lesson in economics.
Once the Dubai PR machine got into full swing the whole affair became nothing more extraordinary than a plain-old restructuring of 40 billion dollars worth of debt — no big deal indeed.
The sad fact is that this would have been true: restructuring is a word that has been used so often in the past 18 months that it has almost become white noise in the background of international economic news. If this had just been a simple restructuring from start to finish then the effect would have been minimised. Unfortunately it wasn’t.
Several days later Abu Dhabi took the heat 10 billion cash-injection but by then the damage had been done.
Maybe I shouldn’t be dragging all this up though, because a report released last week said that searches for Dubai property on Rightmove Overseas were up 45.5%. Analysts tend to be sceptical about percentile rises like this, because 100% of very little is not a whole lot. None the less it does indicate that perhaps people aren’t giving Dubai property as wide a berth as they were last year.