If it is more than six, ‘watch out for complaints’July 7, 2015 12:00
Do you believe the Dubai story?
The chairman of HSBC in the Middle East said Dubai’s multi-billion dollar debt is reasonable, and that “if you believe the Middle East story, you have to believe the Dubai story.” Kipp’s not sure what to believe.
October 8, 2009 4:18 by Dana El Baltaji
We’ve heard economist describe Dubai’s debt as reckless, irresponsible and vast, but we’ve never heard anyone say it’s “reasonable.”
Youssef Nasr, chairman of HSBC Bank Middle East Ltd., told newswire Bloomberg on Thursday that given the size and growth rate of Dubai’s economy, the debt is “reasonable.”
“If you believe the Middle East story, you have to believe the Dubai story,” he said. However, the market needs to address the “temporary mismatches in supply and demand.”
Dubai’s debts, which EFG-Hermes claims is at least $84.7 billion in spite of the government’s estimate of $80 billion, have made headlines worldwide and prompted a significant drop in investor confidence in the emirate’s key industries, including real estate.
However, Dubai’s Ruler, Sheikh Mohammed bin Rashid Al Maktoum, insists the government will repay its debts, including the $4.52 billion debt due this quarter.
“I assure you we are alright, the UAE is alright, and we are not worried,” Sheikh Mohammed said at his Zabeel palace in Dubai in September, when reporters asked if Dubai will meet its financial commitments this year.
The government has already sold half of a $20 billion bond to the UAE Central Bank to raise capital for distressed state-owned companies. It plans to launch the remaining $10 billion soon.
Until then, however, Dubai’s industries continue to slump. This year’s Cityscape exhibition was a lackluster event compared to previous years. The exhibition was 30 percent smaller than last year’s, and it reportedly received only half of 2008’s visitors.
Investors’ lack of confidence in Dubai’s story has dragged property prices to 2006 levels, according to a study by Landmark Advisory. Apartment prices fell by 3 percent during the third quarter of 2009, bringing the overall drop in prices to 38 percent since the market’s peak in 2008.
And given that another 20,000 residential units are expected to flood Dubai’s property market in 2009 (according to estimates by Jones Lang Lasalle, bringing to total number of residential stock in the emirate to 276,000, it is unlikely that real estate prices will rise.
It is difficult to keep believing in the Dubai story when its key industries continue to slide. However, investors cannot deny that while Dubai has over-stretched itself considerably, it has the capacity to turn itself around. The question is when.