Had an interesting chat with a colleague over brunch yesterday regarding Dubai, the Dirham and ME in general.
The last 3 weeks has seen a large outflow of money from Dubai bank accounts, mainly due to uncertainty and volatility within the World markets. It's mostly panic and sentiment driven but this sell off has created a lack of cash flow which, as any treasurer will tell you, is a serious concern for markets. The banks need the transactions to keep the money moving around and several of the main banks are genuinely worried that if this trend continues, we're heading for another crash. We're already starting to see a glut of property on the market, not helped by concerns over a devaluing market and restrictions on borrowing imposed by the central bank. You only need to see all the latest glossy property releases to see that the stuff is not selling, even with only 30% payments required before completion. 10 years ago, the stuff was flying off the shelf with 90% paid before handover! Dirty Russian money is already here and the devalue of their currency has effected tourism and further investment.The drop in oil revenue is compounding the downturn and he says that the next year or so will be crucial in whether Dubai grows or sinks. Current analysis, in his personal opinion, is the latter. The press, however, are highly unlikely to publish any concerns as it would only drive an unstable and vulnerable market towards the self fulfilling prophecy.
Whatever happens however, the dirham will still remain pegged to the dollar. That, he says, is a definite. VAT will slowly be brought in along with other means of generating income such as small increases in Salik, public transport, airport tax, DEWA bills (expats only).
Maybe that time again to consider Gold or a great buying opportunity for equities and property?
Harry