Dubai in a Meltdown?

Dubai’s posh Jumeirah Beach Residence district had luxury apartment rents drop by 15% from a year ago. Property prices have fallen more than 15% since 2014. Stock market is down 13% this year – the worst performance in the region. New business licenses issued in 2018 Q2 is down 26% from its peak in 2016. Growth in passenger traffic through Dubai’s international airport is near zero.

This year growth is expected to be 3% based on infrastructure spending for Expo 2020 Worldfair. But the Government cannot keep spending to enhance growth. Goods once shipped through Dubai are now moved through other countries like Oman. These countries are developing non-oil services which Dubai was famous for. Portfolio funds are moving from Dubai to the Saudi Exchange.

Then there is the “post-dated” cheque phenomenon. This is a chain-link that is waiting to collapse. Businessmen write cheques based on post-dated cheques received from another. One man defaults and the entire chain collapses. Abraaj Capital had a USD48 million dollar cheque bounce recently. From January 2018 to end May 2018, Dirham 26 billion worth of cheques bounced (that’s USD 7 billion). A trigger for disaster? Then there are other signs, phone connections cancelled, children withdrawn from schools, property selling at 25% of its previous value, Gold souk has empty stores, hotels have cut average price significantly -  but perhaps this due to the heat of summer! But Dubai’s appeal on questionable funds/transactions may no longer be there with OECD restrictions and Anti-Money Laundering initiatives. But many say the bottom has yet to be reached!

So the possible meltdown is an opportunity for angels with stout hearts!

Ref: 

1. Dubai's Economy is meting like a Glacier in Desert by Mir Mohammad Ali Khan
2. The Downfall of Dubai's Star Investor by Tracy Alloway, Dinesh Nair, Matthew Martin