Dubai’s Property Market Collapse. It said real estate activity grew 7 percent in 2018 and accounted for nearly 25 percent of total economic growth. But it also warned main risks to the outlook stem from long-standing debt problems, citing IMF data that show that the debt of Dubai’s government-related entities (GREs) – which were at the heart of the Dubai’s debt crisis in 2009 – amounted to $60 billion, equal to 50 percent of Dubai’s GDP. DUBAI, United Arab Emirates — Dubai, the glittering commercial hub of the Gulf, is facing the risk of a debt crisis reminiscent of the 2009 crash that wiped out thousands of jobs and nearly half the value of the emirate's stock market, economists are warning. With the pandemic amplifying the supply-demand imbalance, S&P Global Ratings wrote in a note on Thursday, "We now expect to see international demand for property in UAE to be subdued and the fall in residential prices to be steeper than we had expected, and lingering well into 2021. Data is a real-time snapshot *Data is delayed at least 15 minutes. Exactly on December 12, 2016, I wrote an article predicting that Dubai is going to see its economic fall. Dubai, the Middle East's trade and tourism hub, has been hit hard by coronavirus-containment measures and is set for an economic contraction almost four times worse than during the global financial crisis in 2009, S&P said.
The government said GDP growth was largely driven by the performance of trade related activities, which grew by 1.3 percent in 2018 from a year earlier, representing 18.1 percent of the total growth achieved last year. “Debt restructurings in 2014 have masked the problems in recent years. The assets of the emirate's sovereign wealth funds constitute nearly $950 billion, Capital Economics wrote, "which could pay off the Dubai's GRE debts more than thirteen times over. I even gave the dates that it may happen by 2018. The economy slowed from 3.1 percent growth in 2017, revised government data showed.
Residential property prices have fallen 30% from their 2014 peak oversupply and weakening demand, and revenue per available hotel room is down more than 25% since 2015. Additional reporting by Davide Barbuscia; Editing by Toby ChopraFILE PHOTO: General view of Dubai's cranes at a construction site in Dubai, UAE December 18, 2018.
Tourism has also evaporated since international travel halted in late March. London-based Capital Economics in a report said the property sector is likely to remain in the doldrums while a weakness in the global economy will weigh on Dubai’s manufacturing and logistics sectors. This "will cause Dubai's economy to contract sharply, exacerbating overcapacity in key sectors and making it more difficult for the Emirate's government-related entities (GREs) to service their large debts," the firm wrote. Dubai's GREs, one of which — investment company Dubai World — triggered the emirate's 2009 debt crisis when it couldn't meet its repayments, have cumulative debts equal to $88.9 billion, or more than 80% of Dubai's gross domestic product, Capital Economics estimates. And a Fitch Ratings report last September warned that banks "have not fully recovered" from the 2009 crash and "smaller banks are more vulnerable to deterioration in credit conditions due to thinner capital buffers and lower revenue generation."
REUTERS/Satish Kumar Officials have previously estimated that Expo will provide a boost to the economy equal to $38 billion, or 33 percent of GDP. Dubai needed a $20 billion bailout from oil-rich Abu Dhabi to escape a debt crisis in 2009 caused by collapsing property prices, which had threatened to force some state-linked companies to default on billions of dollars of debt. In 2018, the IMF estimated that GRE"This is not the first time markets have fretted about a Dubai default," Charles Robertson, global chief economist at Renaissance Capital, told CNBC. “We’ve warned before that the risk of overcapacity after the World Expo means that the GREs could face weaker-than-expected revenues, harming their ability to service these debts,” he said. There is still another lingering bill which totals approximately half the value Dubai's entire economy. The 2017 figure was revised from the previous growth figure of 2.8 percent.
"Abu Dhabi has the resources, even at these levels of Abu Dhabi in March announced a $27 billion emergency stimulus plan to help private sector businesses and banks affected by the pandemic.
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