This morning, Dubai’s stock market crashed 8%.
The catalyst was trouble in the country’s real estate sector — the CEO of Arabtec, which built the Burj Khalifa, resigned yesterday amid hundreds of job cuts.
If you’ve been paying attention to Dubai real estate recently, this may not have come as a total surprise.
According to Global Property Guide, prices climbed 10% in Q1 against Q4, and 32% YOY — easily the largest jumps in the world. The IMF warned last month of “unsustainable price dynamics and an eventual correction,” and that megaprojects could create risks to Dubai’s government-sponsored entities, which are looking at debt levels of 141% per cent of Dubai GDP.
Bloomberg reported the country’s central bank recently said rental yields in Dubai, as well as Abu Dhabi, had fallen below historical averages while real estate prices rose, suggesting the market may be imbalanced.
Somehow none of this alarmed HSBC, which wrote in April, “We expect this trend to continue at least for the next two years as the economy recovers and Dubai maintains its reputation as a safe haven in the region.” In their partial defence, the IMF’s broader take on the country was mostly upbeat.
But none of this looks terribly reassuring.
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