The Emirates, a grouping of gulf states could certainly do without any more real estate woe, but unfortunately, they must have lost their magic lamp, because the EU crisis is set to send a property sandstorm their way -- in fact, the headwinds are already taking their toll.
During the boom, many of the buyers that caused scintillation in the Dubai property market were from the EU, but now not only Dubai, but the UAE and wider gulf region is wishing that the loss of such buyers were its only exposure to the EU's sovereign debt crisis. In reality, they face a myriad of problems.
For a start there is falling oil demand, which is leading to a fall in the price of crude oil, the emirates and wider gulf region is one of the few places in the world where this is a negative development. On top of that, the sovereign wealth funds of the emirates are exposed to European debt, and also to its banks, with the latter being the biggest problem according to experts.
It is the poor performance of the Emirates Sovereign Wealth Funds that look set to have the biggest impact on the property markets. Over the past few weeks and days many developments have been postponed and cancelled due to lack of funding.
In 2008, Abu Dhabi put together Vision 2030, to replace oil revenues with tourism and industry as drivers of growth. As part of this vision, many state-run companies were formed, with the intentions of raising most of their funding through private channels. But, the EU was a major part of these intentions, and the funding quickly dried up due to the worsening effects of the financial crisis, and the sovereign debt crisis.
Thus, the government stepped in to fill the shortfall, and now, with the government sovereign wealth funds suffering as well, many of the projects are being postponed and cancelled.
Aldar Properties, Abu Dhabi’s biggest developer announced plans to cut its workforce by 24 percent as it focuses on existing projects and properties that generate steady income. Government-owned Tourism Development & Investment said on Oct 29 that it would delay the completion of the Zayed National Museum as well as branches of the Louvre and Guggenhem due to the magnitude of work. Plans for a 100,000 sq m headquarters building that would produce more energy than it uses were also shelved by Masdar in September.
- Monday 07 November 2011