26 May 2016
Dubai: This time it’s Different
As the fears of a redux of the 2008 crash permeate through the ecosystem, a closer examination of the fundamentals at play suggests that ‘this time is different’. A macro look into economy reveals that Dubai experienced a +4.1% growth in 2015, unlike during the WFC (World Financial Crisis) where it incurred a negative growth of -4.3%.
In 2008/09 company formations remained stagnant in the DED jurisdiction, whereas in 2014/15 it grew by 7%. Other indicators such as the ‘housing starts’ and budget spends attests to the efficacy of the expansive fiscal policy that Dubai has currently adopted. In contrast, Dubai in 2008, it was forced to cut back on spending leading to flurry of stalled and cancelled projects.
A peak to trough analysis of the Dubai Financial Markets reveals that in the 2008 crash the index fell by 77%, compared to this time where the decline was nearly half. The lower volatility in the markets suggests that investor confidence and future growth remains positive, relative to the outlook in 2008.
Similarly this time around the real estate markets have been relatively more resistant to the exogenous and endogenous factors at play (i.e. low oil prices and the strong dollar). During the WFC city-wide prices fell by 31% in the first 22 months. However in the current slump, prices have fallen by nearly 13% in the same time frame. This difference can signify the maturity of the market and investor base, as Dubai continues to diversify its economy.
To download the full report click here: http://blog.reidin.com/PublicReports/UAE160527.pdf