Dubai from boom to bust - Financial Times & Bloomberg downgrade UAE
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Dubai from boom to bust - Financial Times & Bloomberg downgrade UAE
Emirates property prices 'fall off cliff' in meltdown
4:00AM Wednesday Feb 04, 2009
Property prices in the United Arab Emirates "fell off a cliff" according to Margan Stanley's analysts, after banks reduced lending and speculators withdrew from the market because of the global economic crisis, Morgan Stanley said in a note to investors.
In Dubai, prices have slumped over 25 per cent from the market's peak in September, while Abu Dhabi prices have declined more than 20 per cent over the last few months, according to the US investment bank. There were sharp falls in the number of transactions during the fourth quarter, the bank said.
Deteriorating economic conditions, job cuts and the unavailability of mortgages had "resulted in a worse than expected performance in the UAE property market, especially in Dubai", Mai Attia, an analyst based in the sheikdom, said.
Dubai opened its property market to foreign investors in 2002, while Abu Dhabi allowed foreign ownership three years later, fuelling a boom that was boosted by low interest rates.
Banks including HSBC Holdings and Lloyds TSB Group clamped down on mortgages in the last quarter as the global recession started to affect the region, forcing construction companies to scale back projects and cut jobs.
Emaar Properties, the country's biggest publicly traded developer - trading at at an all-time low at the arab stockmarket, due to their gloomy outlook - will be affected most by the drop in prices because two of its projects, Burj Dubai and Old Town, have "taken the biggest hit since the peak", the report said.
Burj Dubai overtook Taipei 101 as the world's tallest building, Emporis Buildings in Darmstadt, Germany, said in a report yesterday.
In Abu Dhabi, Aldar Properties' Raha Beach development was most affected, the report said. The emirate's housing shortage hasn't helped sustain prices as speculators exited the market and financing became scarce.
Emaar's shares dropped 84 per cent in the past 12 months, while Abu Dhabi's two largest developers, Aldar and Sorouh Real Estate, slid 77 per cent and 69 per cent respectively.
Construction projects totalling US$75 billion ($147 million) have been either delayed or cancelled in the UAE, HSBC Bank Middle East said. The majority of projects affected were high-end residential and commercial developments.
The UAE government doesn't release official data on property prices in the country or the number of completed transactions.
Emaar ran a "high risk"of customers cancelling purchases or defaulting, Morgan Stanley said. Any new projects undertaken by the Dubai-based company in the next two years might sell at a "significant 'sensible' discount"compared with prices in the past year.
The developer is among six government-owned companies in Dubai whose credit ratings are under review at Moody's Investors Service, the ratings company said.
Rental rates "started to ease in Dubai in December, where we expect the average rents have fallen by 7 per cent" since the summer, Attia wrote in the report.
"Abu Dhabi seems more resilient so far, given its different demand supply fundamentals."
- BLOOMBERG
Well, we all seen it coming - now finally the over inflated property-bubble went "Bllooooppp"
Same tenor at the financial times Last week:
"Dubai from boom to bust"
FT.com / Comment / Analysis - Emirate on the ebb
At the height of Dubai’s recent boom, thousands of foreigners were arriving every day to seek their fortunes in this Gulf city of boundless ambition. Now, vehicles in the car park outside the airport gather dust as redundant expatriates abandon their wheels, fleeing home before they default on automotive loans and risk imprisonment.
Officials in the emirate were until the last few months unruffled by the credit crisis and a dramatic fall in oil prices, arguing that the services-led economy had not been affected. Indeed, they maintained, it would provide a safe haven for bankers and western companies suffering from the global downturn.
Dubai’s six-year boom, which rode the regional petrodollar wave, was fuelled by the city’s infrastructure and quality of life rather than by oil itself, of which the emirate has little. But the very openness of an economy built on finance and property investment now leaves it ill-placed to weather the storms raging elsewhere.
Amid a collapse of business and consumer confidence (see chart), financial and property companies have been shedding thousands of workers. The once steady stream of British tourists is also drying up as recession bites in the UK and sterling collapses against the dollar-pegged dirham.
The United Arab Emirates, of which Dubai is part, had to support the banking system with a Dh120bn ($33bn, £24bn, €25bn) package and bail out Dubai’s two mortgage providers as the city’s property bubble burst. Credit default spreads on the emirate’s debt have since ballooned on worries that it might not be able to repay creditors without the help of the UAE’s capital, oil-rich Abu Dhabi.
Bad headlines such as these are not part of the Dubai script of perennial growth. In response, Sheikh Mohammed bin Rashid Al Maktoum, the emirate’s ruler, has formed an advisory council to steer Dubai through its greatest challenge since the Gulf was plunged into its own 1930s depression when the pearling industry collapsed.
Chart
Sheikh Mohammed for years encouraged his top lieutenants to compete against each other to create the biggest and best developments. Such competition quickened the city’s growth but it also encouraged increasingly grandiose projects founded on debt. As bullish growth scenarios began to confuse unusually loose credit conditions with a new paradigm in global finance, Dubai was seen as a crucial staging post in the shift in economic power from the west to emerging Asia.
Now, these officials are working together on the same committee to prevent the global slowdown leading to a Dubai meltdown. “We are now sitting together for the first time in a long time,” says Nasser al-Shaikh, director-general of the department of finance and another advisory council member.
Mr Shaikh says ambitious growth targets of 11 per cent a year until 2015 have been reined back to 4-6 per cent. The government is also planning a fiscal stimulus that will increase government spending by 42 per cent this year.
But by the time the council went public with its findings in November, the rapid deceleration had given rise to speculation that Abu Dhabi, the richest member of the UAE, might have to bail out its flashier neighbour. Rumours spread that Abu Dhabi would only stump up the cash if Dubai ceded control of its successful airline, Emirates.
Federal support has come through folding Dubai’s troubled mortgage companies into well-capitalised Abu Dhabi banks. There have been other direct discussions between Dubai and Abu Dhabi state companies, although none has reached agreement.
Sheikh Mohammed’s Dubai International Capital fund, whose assets have shrunk sharply, briefly courted investment from Mubadala, the Abu Dhabi investment arm. No substantive discussions ensued, people close to the matter say, but the incident fuelled rumours of a bail-out. Well before the credit crisis raised questions about Dubai’s solvency, Mubadala and Dubai Aluminium had been discussing equity restructuring of their joint venture, Emirates Aluminium, a vast smelter on the Abu Dhabi/Dubai border.
Dubai officials insist they will handle their own problems, only seeking federal support as a last resort.
The most pressing issue for the emirate’s reputation is restructuring its $80bn debt, around one-quarter of which is estimated to be maturing this year. Moody’s has raised concerns that Dubai’s high debt, at more than 100 per cent of annual gross domestic product, could force it to seek support from Abu Dhabi. Fitch, meanwhile, has downgraded the debt of rated state-linked companies in the emirate.
State-linked companies have already paid off more than $2bn in outstanding debt. The next big refinancing, Borse Dubai’s $4bn loan, should provide an insight into the emirate’s risk profile among international creditors.
The government also believes it has been understating GDP, making its debt levels look more burdensome than they are. A new 2007 figure of $70bn-$80bn will soon be announced as the statistical department upgrades 1980s methodology responsible for the current figure of about $50bn for 2006.
Bankers worry that the government remains in denial about the depth of its problems, given the slowdown facing its services economy and the closure of international financial markets. “Dubai is still just trying to market its way out of this huge hole,” says one.
Dubai’s property market, once a favourite destination of foreign investors, is in need of financial surgery as developers face a collapse in sales amid dire investor sentiment and banks shy away from providing mortgages. Prices fell 23 per cent between the third and fourth quarters of last year, according to HSBC’s index covering mortgage issuance – although anecdotal evidence suggests some distressed properties are selling at about half pre-summer peaks.
Officials say that projects not yet sold to the public – as much as half all announced developments – will be shelved until market conditions improve. The government is also considering helping developers who are finding it hard to complete projects. But more building sites are falling silent as funds dry up, despite Mr Shaikh’s assurances that government will not allow the city’s skyline to be marred by half-built structures.
The authorities have yet to reveal a plan for financing the property sector, having assumed that deposit injections into the country’s banks last year will be enough to revive lending. The government estimates that, at most, 34,000 units will enter the market this year, only half the number predicted by several research reports, including Morgan Stanley’s August forecast in which the US bank also spoke of a 10 per cent price decline by 2010.
Chris O’Donnell, chief executive of Nakheel, a government-owned developer, says it has the resources to cope as it slows work on a variety of projects, such as the Trump Tower on its landmark Palm Jumeirah island. He paints a rosy picture of the company’s first major refinancing, a $3.5bn Islamic bond, in November this year. Nakheel’s credit default swaps indicate that investors are more worried about Nakheel than other parts of Dubai Inc. “The world will be a totally different place [by November] and we don’t think there will be any refinance issues at that point,” says Mr O’Donnell.
With local banks reluctant to lend, financing Dubai’s property and infrastructure developments will remain its greatest challenge this year. “Possible access to federal [UAE] funding will drive how much Dubai can and cannot do to maintain growth,” says Jeffrey Culpepper, Middle East head of investment banking for Credit Suisse. “If you look at all the mega-projects announced, without federal funding and with the current dislocation in the global finance markets, some will be hard to finish on schedule.”
So Dubai’s ambitions may rest not only on the health of the global economy, and with it a revival of the oil price, but also on the attitude of global banks and capital markets. Dubai has spent three decades transforming itself into a global city; its future now depends on the world reciprocating this grand vision.
Copyright The Financial Times Limited 2009
Well, that's pretty much the end of the "property flipping success story" for the foreseeable future;
Rents in my area /Dubai Marina & JBR / are coming down already quite nicley & significantly: by some merely 25-30 % - and you have NOT to come up with one check upfront anymore - Nada- That's over now
That's good news for all non-property owning hard working tenants in DXB, which are less badly ripped of by their greedy landlords now;
my property in Europe has never gone up so lunatic, so it's nicely keeping it's value
the other really good news is - see Gulfnews two days ago - they officially cancelled their biased "One Villa One family rule" - as it has been forcing too many people out of the country;
now you can actually legally (!) share villas/ up to to 8 peaople is OK- if the villa's big enough, the municipality states all of a sudden ... Good news alltogether
4:00AM Wednesday Feb 04, 2009
Property prices in the United Arab Emirates "fell off a cliff" according to Margan Stanley's analysts, after banks reduced lending and speculators withdrew from the market because of the global economic crisis, Morgan Stanley said in a note to investors.
In Dubai, prices have slumped over 25 per cent from the market's peak in September, while Abu Dhabi prices have declined more than 20 per cent over the last few months, according to the US investment bank. There were sharp falls in the number of transactions during the fourth quarter, the bank said.
Deteriorating economic conditions, job cuts and the unavailability of mortgages had "resulted in a worse than expected performance in the UAE property market, especially in Dubai", Mai Attia, an analyst based in the sheikdom, said.
Dubai opened its property market to foreign investors in 2002, while Abu Dhabi allowed foreign ownership three years later, fuelling a boom that was boosted by low interest rates.
Banks including HSBC Holdings and Lloyds TSB Group clamped down on mortgages in the last quarter as the global recession started to affect the region, forcing construction companies to scale back projects and cut jobs.
Emaar Properties, the country's biggest publicly traded developer - trading at at an all-time low at the arab stockmarket, due to their gloomy outlook - will be affected most by the drop in prices because two of its projects, Burj Dubai and Old Town, have "taken the biggest hit since the peak", the report said.
Burj Dubai overtook Taipei 101 as the world's tallest building, Emporis Buildings in Darmstadt, Germany, said in a report yesterday.
In Abu Dhabi, Aldar Properties' Raha Beach development was most affected, the report said. The emirate's housing shortage hasn't helped sustain prices as speculators exited the market and financing became scarce.
Emaar's shares dropped 84 per cent in the past 12 months, while Abu Dhabi's two largest developers, Aldar and Sorouh Real Estate, slid 77 per cent and 69 per cent respectively.
Construction projects totalling US$75 billion ($147 million) have been either delayed or cancelled in the UAE, HSBC Bank Middle East said. The majority of projects affected were high-end residential and commercial developments.
The UAE government doesn't release official data on property prices in the country or the number of completed transactions.
Emaar ran a "high risk"of customers cancelling purchases or defaulting, Morgan Stanley said. Any new projects undertaken by the Dubai-based company in the next two years might sell at a "significant 'sensible' discount"compared with prices in the past year.
The developer is among six government-owned companies in Dubai whose credit ratings are under review at Moody's Investors Service, the ratings company said.
Rental rates "started to ease in Dubai in December, where we expect the average rents have fallen by 7 per cent" since the summer, Attia wrote in the report.
"Abu Dhabi seems more resilient so far, given its different demand supply fundamentals."
- BLOOMBERG
Well, we all seen it coming - now finally the over inflated property-bubble went "Bllooooppp"
Same tenor at the financial times Last week:
"Dubai from boom to bust"
FT.com / Comment / Analysis - Emirate on the ebb
At the height of Dubai’s recent boom, thousands of foreigners were arriving every day to seek their fortunes in this Gulf city of boundless ambition. Now, vehicles in the car park outside the airport gather dust as redundant expatriates abandon their wheels, fleeing home before they default on automotive loans and risk imprisonment.
Officials in the emirate were until the last few months unruffled by the credit crisis and a dramatic fall in oil prices, arguing that the services-led economy had not been affected. Indeed, they maintained, it would provide a safe haven for bankers and western companies suffering from the global downturn.
Dubai’s six-year boom, which rode the regional petrodollar wave, was fuelled by the city’s infrastructure and quality of life rather than by oil itself, of which the emirate has little. But the very openness of an economy built on finance and property investment now leaves it ill-placed to weather the storms raging elsewhere.
Amid a collapse of business and consumer confidence (see chart), financial and property companies have been shedding thousands of workers. The once steady stream of British tourists is also drying up as recession bites in the UK and sterling collapses against the dollar-pegged dirham.
The United Arab Emirates, of which Dubai is part, had to support the banking system with a Dh120bn ($33bn, £24bn, €25bn) package and bail out Dubai’s two mortgage providers as the city’s property bubble burst. Credit default spreads on the emirate’s debt have since ballooned on worries that it might not be able to repay creditors without the help of the UAE’s capital, oil-rich Abu Dhabi.
Bad headlines such as these are not part of the Dubai script of perennial growth. In response, Sheikh Mohammed bin Rashid Al Maktoum, the emirate’s ruler, has formed an advisory council to steer Dubai through its greatest challenge since the Gulf was plunged into its own 1930s depression when the pearling industry collapsed.
Chart
Sheikh Mohammed for years encouraged his top lieutenants to compete against each other to create the biggest and best developments. Such competition quickened the city’s growth but it also encouraged increasingly grandiose projects founded on debt. As bullish growth scenarios began to confuse unusually loose credit conditions with a new paradigm in global finance, Dubai was seen as a crucial staging post in the shift in economic power from the west to emerging Asia.
Now, these officials are working together on the same committee to prevent the global slowdown leading to a Dubai meltdown. “We are now sitting together for the first time in a long time,” says Nasser al-Shaikh, director-general of the department of finance and another advisory council member.
Mr Shaikh says ambitious growth targets of 11 per cent a year until 2015 have been reined back to 4-6 per cent. The government is also planning a fiscal stimulus that will increase government spending by 42 per cent this year.
But by the time the council went public with its findings in November, the rapid deceleration had given rise to speculation that Abu Dhabi, the richest member of the UAE, might have to bail out its flashier neighbour. Rumours spread that Abu Dhabi would only stump up the cash if Dubai ceded control of its successful airline, Emirates.
Federal support has come through folding Dubai’s troubled mortgage companies into well-capitalised Abu Dhabi banks. There have been other direct discussions between Dubai and Abu Dhabi state companies, although none has reached agreement.
Sheikh Mohammed’s Dubai International Capital fund, whose assets have shrunk sharply, briefly courted investment from Mubadala, the Abu Dhabi investment arm. No substantive discussions ensued, people close to the matter say, but the incident fuelled rumours of a bail-out. Well before the credit crisis raised questions about Dubai’s solvency, Mubadala and Dubai Aluminium had been discussing equity restructuring of their joint venture, Emirates Aluminium, a vast smelter on the Abu Dhabi/Dubai border.
Dubai officials insist they will handle their own problems, only seeking federal support as a last resort.
The most pressing issue for the emirate’s reputation is restructuring its $80bn debt, around one-quarter of which is estimated to be maturing this year. Moody’s has raised concerns that Dubai’s high debt, at more than 100 per cent of annual gross domestic product, could force it to seek support from Abu Dhabi. Fitch, meanwhile, has downgraded the debt of rated state-linked companies in the emirate.
State-linked companies have already paid off more than $2bn in outstanding debt. The next big refinancing, Borse Dubai’s $4bn loan, should provide an insight into the emirate’s risk profile among international creditors.
The government also believes it has been understating GDP, making its debt levels look more burdensome than they are. A new 2007 figure of $70bn-$80bn will soon be announced as the statistical department upgrades 1980s methodology responsible for the current figure of about $50bn for 2006.
Bankers worry that the government remains in denial about the depth of its problems, given the slowdown facing its services economy and the closure of international financial markets. “Dubai is still just trying to market its way out of this huge hole,” says one.
Dubai’s property market, once a favourite destination of foreign investors, is in need of financial surgery as developers face a collapse in sales amid dire investor sentiment and banks shy away from providing mortgages. Prices fell 23 per cent between the third and fourth quarters of last year, according to HSBC’s index covering mortgage issuance – although anecdotal evidence suggests some distressed properties are selling at about half pre-summer peaks.
Officials say that projects not yet sold to the public – as much as half all announced developments – will be shelved until market conditions improve. The government is also considering helping developers who are finding it hard to complete projects. But more building sites are falling silent as funds dry up, despite Mr Shaikh’s assurances that government will not allow the city’s skyline to be marred by half-built structures.
The authorities have yet to reveal a plan for financing the property sector, having assumed that deposit injections into the country’s banks last year will be enough to revive lending. The government estimates that, at most, 34,000 units will enter the market this year, only half the number predicted by several research reports, including Morgan Stanley’s August forecast in which the US bank also spoke of a 10 per cent price decline by 2010.
Chris O’Donnell, chief executive of Nakheel, a government-owned developer, says it has the resources to cope as it slows work on a variety of projects, such as the Trump Tower on its landmark Palm Jumeirah island. He paints a rosy picture of the company’s first major refinancing, a $3.5bn Islamic bond, in November this year. Nakheel’s credit default swaps indicate that investors are more worried about Nakheel than other parts of Dubai Inc. “The world will be a totally different place [by November] and we don’t think there will be any refinance issues at that point,” says Mr O’Donnell.
With local banks reluctant to lend, financing Dubai’s property and infrastructure developments will remain its greatest challenge this year. “Possible access to federal [UAE] funding will drive how much Dubai can and cannot do to maintain growth,” says Jeffrey Culpepper, Middle East head of investment banking for Credit Suisse. “If you look at all the mega-projects announced, without federal funding and with the current dislocation in the global finance markets, some will be hard to finish on schedule.”
So Dubai’s ambitions may rest not only on the health of the global economy, and with it a revival of the oil price, but also on the attitude of global banks and capital markets. Dubai has spent three decades transforming itself into a global city; its future now depends on the world reciprocating this grand vision.
Copyright The Financial Times Limited 2009
Well, that's pretty much the end of the "property flipping success story" for the foreseeable future;
Rents in my area /Dubai Marina & JBR / are coming down already quite nicley & significantly: by some merely 25-30 % - and you have NOT to come up with one check upfront anymore - Nada- That's over now
That's good news for all non-property owning hard working tenants in DXB, which are less badly ripped of by their greedy landlords now;
my property in Europe has never gone up so lunatic, so it's nicely keeping it's value
the other really good news is - see Gulfnews two days ago - they officially cancelled their biased "One Villa One family rule" - as it has been forcing too many people out of the country;
now you can actually legally (!) share villas/ up to to 8 peaople is OK- if the villa's big enough, the municipality states all of a sudden ... Good news alltogether
Last edited by Cyberbird; 4th Feb 2009 at 18:23.
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Guess he's lucky he did miss the wave otherwise he may be drowning in sorrow now
The UAE has been an over inflated market for years now, bubble had to burst sometime.
Mmm at $40ish a barrel maybe H.H. can't afford that executive A380 now
The UAE has been an over inflated market for years now, bubble had to burst sometime.
Mmm at $40ish a barrel maybe H.H. can't afford that executive A380 now
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Shismatic...
Right on the button me ol china, but don't isolate it to this part of the world [The Middle East] as far as greed goes.
I mean let's face it, through greed, negligence and complacency the Western world (particularly the U.S.) are now in a distasterous predicament!!
In my mind, Banks et al are all the same.
They always have been and always will be: Crooks, Thieves, Liars and Blubberers!
I mean let's face it, through greed, negligence and complacency the Western world (particularly the U.S.) are now in a distasterous predicament!!
In my mind, Banks et al are all the same.
They always have been and always will be: Crooks, Thieves, Liars and Blubberers!
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We are addicted to credit
Our addiction to cheap credit has has created this bubble. The high rents were going to kill this place anyway ( business leaving, high retail rent=high retail price, high room rate, difficulties in attracting staff etc...)
The banks need to recapitalise either with goverment infusion ( read taxes ) or depositors. No matter our you look at it, home owners will have to pay. Why would depositors subsidise your home and all those big profits?
As a solution to our cheap credit addiction, you propose more cheap credit?
The money has to come from somewhere.
Realestate is back to what it should always have been; a long term, safe, highly leverage small return investement.
Unfortunately for us, we will have to pay for our excesses for while.
The banks need to recapitalise either with goverment infusion ( read taxes ) or depositors. No matter our you look at it, home owners will have to pay. Why would depositors subsidise your home and all those big profits?
As a solution to our cheap credit addiction, you propose more cheap credit?
The money has to come from somewhere.
Realestate is back to what it should always have been; a long term, safe, highly leverage small return investement.
Unfortunately for us, we will have to pay for our excesses for while.
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schismatic
I don't agree competely with all the above.
Dubai is not the only country where LONGTERM intrest rates have been rising recently, as you describe it. There is a little misconception about intrest rates. Remember there are 2 types of intrest rates: short and long term.
Short term intrest rates are set by the national banks (like the Federal Reserve). During the last quarter of 2008, the FEDs of most western nations have adjusted the basic (short term) intrest rate downward to 1 to 3 percent. The banks use this short term intrest rate as a stick to determine the short term lending rate.
The long term intrest rate (used in mortgages etc) is more influenced by supply and demand. It normally follows a similar patern as the short term intrest rate (mostly a bit higher) but NOT always. ie in most countries the ST rate has been dropping, while the LT rate has been rising!!!!
Basically it means that banks want a higher reward for the risk they are taking giving longterm loans.
In the Dubai case it means that banks believe there are now higher risks than before when they issue mortgages and they want an even higher risk premium than before...Either they think you might default on your loan (eg. lose your job) or they believe the underlying property is overvalued and they would lose money if they would have to sell it.
What makes it worse is that there is no real competition in Dubai. I would not be surprised if the banks sit together every now and discuss common strategies (called collusion and in the western world illegal, here in the ME ???).
I think the crash in properties prices is far from over. Till then the LT intrest rate will remain high. When it drops, it means the banks think that the worst is over...
But I do have to agree with you : The banks are NOT there to help you; they want to earn big big bucks ...
. So nothing has changed yet....
Dubai is not the only country where LONGTERM intrest rates have been rising recently, as you describe it. There is a little misconception about intrest rates. Remember there are 2 types of intrest rates: short and long term.
Short term intrest rates are set by the national banks (like the Federal Reserve). During the last quarter of 2008, the FEDs of most western nations have adjusted the basic (short term) intrest rate downward to 1 to 3 percent. The banks use this short term intrest rate as a stick to determine the short term lending rate.
The long term intrest rate (used in mortgages etc) is more influenced by supply and demand. It normally follows a similar patern as the short term intrest rate (mostly a bit higher) but NOT always. ie in most countries the ST rate has been dropping, while the LT rate has been rising!!!!
Basically it means that banks want a higher reward for the risk they are taking giving longterm loans.
In the Dubai case it means that banks believe there are now higher risks than before when they issue mortgages and they want an even higher risk premium than before...Either they think you might default on your loan (eg. lose your job) or they believe the underlying property is overvalued and they would lose money if they would have to sell it.
What makes it worse is that there is no real competition in Dubai. I would not be surprised if the banks sit together every now and discuss common strategies (called collusion and in the western world illegal, here in the ME ???).
I think the crash in properties prices is far from over. Till then the LT intrest rate will remain high. When it drops, it means the banks think that the worst is over...
But I do have to agree with you : The banks are NOT there to help you; they want to earn big big bucks ...
. So nothing has changed yet....
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ie in most countries the ST rate has been dropping, while the LT rate has been rising!!!!
It would be best for everyone if they did a little reading, and understood that banks do not simply get money in as deposits, and then lend that money out as loans. Once you get your head around created credit, you will have a much deeper understanding of the role of central banks, retail banks, confidence and the current situation.
For you and I on the street, the upshot certainly is lower asset prices. How much lower? Almost without fail, economists are wrong- that means asset prices wont fall that far, or will fall by an awful lot.
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Build on Rock
Some very valid points but interest rates are a delicate area. They are used rightly or wrongly to adjust the economic environment.
If they are too high there are complications. Likewise they if they are too low. Markets can be crashes or bubbles depending on what Central Banks and bankers do with interest rates.
Right now Dubai is in a uncontrolled descent; of that there is no doubt. How many building sites are actually active? How many cranes are stationary? Look around. Even the roads are quiet.
Blame it on the speculators, blame it on the banks - whatever you like -but it is what it is. And a collapsing economy serves no-one.
Right now the way to go is to reduce rates to achieve some semblance of stability. Recovery is out of the question. The property market in Dubai has been damaged for years to come. First it needs a bottom, then it need sensible reorganisation with regards to regulation, then it needs to begin marginal growth. All this before any form of trust or confidence will return. The reputation was damaged severely in a few months. It will take years to repair. Public perception is what drives markets and the stories of the Dubai Boom and Bust will be examined for decades to come.
Rates can be cut too low and raised too high. Somewhere lies a sweet spot dependent on conditions. And this needs to be watched and adjusted.
Inflation one year, deflation the next. Oil at 146 last year and 36 this year. 30% currency swings in months. Super boom, then super bust. Who does this serve other than traders and speculators? For everyone else stability and reasonable predictability are the most beneficial.
People should be able to buy houses and everything else at reasonable cost and not fear wild swings. There should be job security. There needs to be a return to valuing customers and employees not shareholders and stock prices.
Build on solid foundations and sound principles. Build on rock not sand....
If they are too high there are complications. Likewise they if they are too low. Markets can be crashes or bubbles depending on what Central Banks and bankers do with interest rates.
Right now Dubai is in a uncontrolled descent; of that there is no doubt. How many building sites are actually active? How many cranes are stationary? Look around. Even the roads are quiet.
Blame it on the speculators, blame it on the banks - whatever you like -but it is what it is. And a collapsing economy serves no-one.
Right now the way to go is to reduce rates to achieve some semblance of stability. Recovery is out of the question. The property market in Dubai has been damaged for years to come. First it needs a bottom, then it need sensible reorganisation with regards to regulation, then it needs to begin marginal growth. All this before any form of trust or confidence will return. The reputation was damaged severely in a few months. It will take years to repair. Public perception is what drives markets and the stories of the Dubai Boom and Bust will be examined for decades to come.
Rates can be cut too low and raised too high. Somewhere lies a sweet spot dependent on conditions. And this needs to be watched and adjusted.
Inflation one year, deflation the next. Oil at 146 last year and 36 this year. 30% currency swings in months. Super boom, then super bust. Who does this serve other than traders and speculators? For everyone else stability and reasonable predictability are the most beneficial.
People should be able to buy houses and everything else at reasonable cost and not fear wild swings. There should be job security. There needs to be a return to valuing customers and employees not shareholders and stock prices.
Build on solid foundations and sound principles. Build on rock not sand....
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well Ferris
Sure it's been some time since I finished macro economics at the university, but I simply suggest you check some european countries LT and ST intrest rates and then come back to the forum. 
I can tell you there are quite a few home owners in my country who are upset now that intrest rates are tumbling but mortgage rates (5 to 10 years and more) are NOT following.
I can tell you there are quite a few home owners in my country who are upset now that intrest rates are tumbling but mortgage rates (5 to 10 years and more) are NOT following.
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So you stand by your comment that long term interest rates (specifically- mortgages) are increasing ? I also assume you have chosen to quote fixed interest, term mortgages as the particular instrument that backs your argument? If so, I can see how you have painted yourself into a corner, but am disappointed at the shallow nature of your fallacious argument. Floating rate retail mortgage rates are not increasing, no matter what you say (except, it seems, in Dubai). That is because that they are, indeed, tied to some centrally controlled rate. If people are upset that existing fixed rate mortgage rates are not decreasing (in Europe or anywhere else), then I'd suggest that they are too stupid to own property. If they are looking to take out a new fixed term interest rate mortgage, then of course they have to look ahead and accept that the floating rate will rise at some point in the future, and they are effectively averaging, and that the cash rate is currently extremely low. Exactly as the money market that generates the rate has. It is not adjusting for "risk". That is a function of the differential between the funding source and the retail rate. Long term mortgages are not funded by the short term market, but by long term instruments.
I had assumed you had brought long term instruments such as government bonds into the discussion (where yields are rising). Oh well.... Re-reading your posts, I just think you don't actually understand retail mortgages or their pricing, or if you do, are being deliberately obtuse by talking only about fixed interest rate mortgages. There are lots and lots of products out there. Certainly, in the context of a central bank easing monetary policy (as schismatic is alluding to) in order to stimulate activity by decreasing interest rates, or increasing rates (as Dubai banks appear to be doing) in the face of worsening conditions- is the actual topic. Hope that clarifies my response.
I had assumed you had brought long term instruments such as government bonds into the discussion (where yields are rising). Oh well.... Re-reading your posts, I just think you don't actually understand retail mortgages or their pricing, or if you do, are being deliberately obtuse by talking only about fixed interest rate mortgages. There are lots and lots of products out there. Certainly, in the context of a central bank easing monetary policy (as schismatic is alluding to) in order to stimulate activity by decreasing interest rates, or increasing rates (as Dubai banks appear to be doing) in the face of worsening conditions- is the actual topic. Hope that clarifies my response.
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You guys are too smart for your own good ! haha. It always amazes how intelligent some pilots I fly with are. But it seems to me, everyone nowadays is claiming they foresaw what was going to happen in Dubai. Yet only a few people, most notably Marooned (???) actually came out and posted his predictions, months ago. It turns out he was spot on.
I was completely wrong in thinking Dubai was relatively sheltered from this economic chaos. I predicted the demise of the US economy but I did not consider the repercussions for the rest of the world. In hindsight, predicting the decline of every aspect of the American way of life, was not terribly insightful. It was inevitable given the 8 years of madness. Before anyone gets their red/white/and blue feathers in a tizzy, I hope the USA pulls itself out of this mess sometime in the next decade. I am completely in support of the recent change of direction in the US.
So the question is, where do we go from here? The turmoil is not going to stop anytime this year, so what should people do to protect themselves? I would appreciate reading the viewpoints of others, because I have no answers myself.
More out of luck than anything else, I dumped most my mutual funds and stocks before things really crashed, which was completely against the advice of my so-called financial advisors. But what to do now? Cash in an offshore account? Gold/Silver? Or dive back into the markets? I have a feeling someone out there has better advice than the self-serving experts. Please share it with us.
I was completely wrong in thinking Dubai was relatively sheltered from this economic chaos. I predicted the demise of the US economy but I did not consider the repercussions for the rest of the world. In hindsight, predicting the decline of every aspect of the American way of life, was not terribly insightful. It was inevitable given the 8 years of madness. Before anyone gets their red/white/and blue feathers in a tizzy, I hope the USA pulls itself out of this mess sometime in the next decade. I am completely in support of the recent change of direction in the US.
So the question is, where do we go from here? The turmoil is not going to stop anytime this year, so what should people do to protect themselves? I would appreciate reading the viewpoints of others, because I have no answers myself.
More out of luck than anything else, I dumped most my mutual funds and stocks before things really crashed, which was completely against the advice of my so-called financial advisors. But what to do now? Cash in an offshore account? Gold/Silver? Or dive back into the markets? I have a feeling someone out there has better advice than the self-serving experts. Please share it with us.
Last edited by mensaboy; 6th Feb 2009 at 14:04.
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Dubai's LCAL slashes order for Boeing Dreamliners
Follow the link for Rest of the story
Boeing jet orders: Minus 13
Follow the link for Rest of the story
Boeing jet orders: Minus 13
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Bank aid prompts fears over support for Dubai
By Robin Wigglesworth in Abu Dhabi and Simeon Kerr in,Dubai
Published: February 6 2009 02:00 | Last updated: February 6 2009 02:00
Abu Dhabi's unilateral move to recapitalise its own banks has sparked fears among investors that the oil-rich capital of the United Arab Emirates may hesitate to support Dubai as the impact of the credit crunch worsens.
A senior Abu Dhabi official said this week's decision to inject Dh16bn ($4.3bn, €3.4bn, £3bn) of extra Tier 1 capital into its five banks, but ignore other banks of the seven-emirate federation, was meant to add an addition layer of protection for its own local houses.
Bankers warned that Abu Dhabi's go-it-alone attitude could mean the federal government might not be as willing as expected to rescue Dubai entities facing default.
Investors in Dubai bonds jumped to that conclusion as the cost of insuring against its default jumped to record highs yesterday.
Dubai, the UAE's commercial hub, is struggling under the weight of about $80bn of short-term debt, about $20bn of which is due for repayment or refinancing this year. Abu Dhabi can rely on vast oil revenues and investment income from the world's largest sovereign wealth fund. The federal government, underpinned by Abu Dhabi's vast wealth, had previously led efforts to stave off recession, injecting Dh50bn of deposits into UAE banks, with promises of a further Dh20bn to come, and opening a Dh50bn credit facility at the central bank.
Dubai's two troubled mortgage providers are also being folded into federally backed institutions in Abu Dhabi.
"Abu Dhabi feels Dubai has been reckless, and probably wants to teach it a lesson," a senior regional bank-er said. "There are a lot of ruler lieutenants involved and they are arguing, but some sort of settlement will have to be reached." Some observers say Abu Dhabi sees the crisis as an opportunity to assert its supremacy in the country's federal structure, while Dubai is striving to maintain its autonomy in the confines of the 37-year-old federation.
Dubai shares fell while Abu Dhabi equities rose -yesterday.
"With the global slowdown having a bigger impact on the Dubai economy and the real estate correction more severe, the absence of any similar move by the Dubai government does not bode well," Deutsche Bank analysts wrote in a note. The injection "could further raise investor concerns over Abu Dhabi's willingness to help Dubai with any potential financing problem", it added.
Dubai officials have said the emirate will solve its debt problems alone. Senior Abu Dhabi officials say they will not offer aid until formally requested by Dubai.
But Dubai's globally oriented economy, argue bankers, may need further financial aid from the capital to avoid a default, especially if credit markets remain locked down and global economic recovery takes time.
By Robin Wigglesworth in Abu Dhabi and Simeon Kerr in,Dubai
Published: February 6 2009 02:00 | Last updated: February 6 2009 02:00
Abu Dhabi's unilateral move to recapitalise its own banks has sparked fears among investors that the oil-rich capital of the United Arab Emirates may hesitate to support Dubai as the impact of the credit crunch worsens.
A senior Abu Dhabi official said this week's decision to inject Dh16bn ($4.3bn, €3.4bn, £3bn) of extra Tier 1 capital into its five banks, but ignore other banks of the seven-emirate federation, was meant to add an addition layer of protection for its own local houses.
Bankers warned that Abu Dhabi's go-it-alone attitude could mean the federal government might not be as willing as expected to rescue Dubai entities facing default.
Investors in Dubai bonds jumped to that conclusion as the cost of insuring against its default jumped to record highs yesterday.
Dubai, the UAE's commercial hub, is struggling under the weight of about $80bn of short-term debt, about $20bn of which is due for repayment or refinancing this year. Abu Dhabi can rely on vast oil revenues and investment income from the world's largest sovereign wealth fund. The federal government, underpinned by Abu Dhabi's vast wealth, had previously led efforts to stave off recession, injecting Dh50bn of deposits into UAE banks, with promises of a further Dh20bn to come, and opening a Dh50bn credit facility at the central bank.
Dubai's two troubled mortgage providers are also being folded into federally backed institutions in Abu Dhabi.
"Abu Dhabi feels Dubai has been reckless, and probably wants to teach it a lesson," a senior regional bank-er said. "There are a lot of ruler lieutenants involved and they are arguing, but some sort of settlement will have to be reached." Some observers say Abu Dhabi sees the crisis as an opportunity to assert its supremacy in the country's federal structure, while Dubai is striving to maintain its autonomy in the confines of the 37-year-old federation.
Dubai shares fell while Abu Dhabi equities rose -yesterday.
"With the global slowdown having a bigger impact on the Dubai economy and the real estate correction more severe, the absence of any similar move by the Dubai government does not bode well," Deutsche Bank analysts wrote in a note. The injection "could further raise investor concerns over Abu Dhabi's willingness to help Dubai with any potential financing problem", it added.
Dubai officials have said the emirate will solve its debt problems alone. Senior Abu Dhabi officials say they will not offer aid until formally requested by Dubai.
But Dubai's globally oriented economy, argue bankers, may need further financial aid from the capital to avoid a default, especially if credit markets remain locked down and global economic recovery takes time.
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Worse in what way?
Dubai has the same thing PLUS a growing over-supply of property as their is still construction going on (though drastically slowing) whilst a good portion of the population is leaving.
In most places, values are back to 2001/2002 levels. What would THAT mean in Dubai? 80% drops?
Hasn't been that bad yet,but, as someone said, we have been late to the party!
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... now finally the writing is on the wall;
the BBC recently had a lengthy report on TV about the downturn in Dubai -
talkinh about "an impending desaster, if might things be worsening further in Dubai - if their rich Abu Dhabi brothers don't bail 'em out, they might be facing insolvency/ unability to pay back their 90 Billions Dollar debts ..."
and a mor recent articel in the BBC shed's some light on the downward tred in Dubai
"Global woes hit Dubai's fragile economy
By Malcolm Borthwick BBC NEWS | Business | Global woes hit Dubai's fragile economy
Editor, Middle East Business Report, BBC World, Dubai
Mr Vail spends time at the Creek rather than working
Pajani Vail came to Dubai a year ago to work in construction.
He is on a three-year contract, but has not worked or been paid for four months.
Mr Vail spends most of his time at the Creek in the old town in Dubai, chatting to friends who are looking for jobs and watching the dhows and abras sail past. "There are quite a few people like me," he says. "There are four or five people from my company looking for a job."
Waste of time
Mr Vail's employer is holding his passport and has told him to wait until work picks up again. Developers have got serious cash flow problems
In the meantime he sleeps on the streets or in the back of trucks.
"One day I have food, one day I don't," he says. "I have to borrow money from friends."
Having left a steady job in India to come to Dubai, Mr Vail is struggling to support his wife and two children back in Chennai.
"What is the point in being here when I have no food, no money and no job?" he asks. "This is a waste of my time. If I go back to India at least I am at home with my family."
No reserves
There are about 1.5 million Indians in the United Arab Emirates.
Guest labourers often leave Dubai when work dries up; many of them are blue collar labourers, living in rooms with six to 10 fellow workers.
An increasing number are, like Pajani, victims of the credit crunch.
Unlike its neighbour Abu Dhabi, Dubai does not have vast oil and gas reserves to fall back on. In many, ways Dubai is a victim of its own success.
It has embraced globalisation and aggressively diversified its economy into non-oil sectors such as financial services, tourism and real estate.
The Emirate is home to some of the most ambitious building projects on the planet. It is building the world's tallest tower and has just opened the world's biggest shopping mall. Not to mention the vast offshore islands.
Struggling developers
But now financial forces have turned, it is exposed.
The announcement by the property developer Nakheel last week that it is delaying construction of a tower that is set to soar more than a kilometre high, is a sign of the times.
The real estate market is beginning to unravel.
"Developers have got serious cash flow problems," says Colin Foreman from Middle East Economic Digest.
"Their revenue was coming from selling properties which hadn't been built yet and they were supplementing this with financing.
"Banks aren't interested in lending them money and nobody is interested in buying property, so their two avenues for finance have gone.
"At the same time they have got huge outgoings because they are building projects that they no longer have money to pay for."
Few statistics
It is easier for companies to lay off workers in Dubai than in the West because there are no unions. Industry insiders have told the BBC that tens of thousands of workers in the construction and real estate market alone have lost their jobs over the last few months. Some thousands of workers have just dumped their cars at the airport and fled the country, reportedly fearing for their jobs and nursing large debts. But it is tricky to quantify the extent of the job losses here as there are few hard statistics.
Regional relocation
Some workers have moved to other countries in the region, such as Qatar, in order to find work. Thanks to revenue generated by its vast gas reserves, Qatar's economy is booming.
It is expected to grow by 9% in 2009, which would make the Gulf state one of the fastest growing economies in the world this year. The British project management company Mace is one of many companies in Dubai trying to relocate its employees within the region.
"The largest reaction or action has been making redundancies," says Ian Tarry, Mace's Middle East director.
"However we have managed to relocate people to other parts of the group. In some case this has involved salary reductions.
"So far Abu Dhabi has taken some of the slack and we have relocated other workers to Saudi Arabia."
Expats and tourists
The worry is that the slowdown in the construction and the real estate sector could seep into the wider economy.
Around four-fifths of Dubai's population are expats.
Fewer expats mean less demand for property.
The tourism market is also being hit. Western tourists are cutting back on spending, and occupancy rates at many of Dubai's luxury hotels are down.
The slump in the non-oil sector is part of the reason why the Egyptian investment bank EFG-Hermes says the United Arab Emirates' economy will shrink this year.
"There are two factors which have supported private consumption," according to Monica Malik, director of economic research at EFG-Hermes.
"The expats who have spent money setting up houses and buying products and secondly the tourists.
"These are both going to fall rapidly, and with greater uncertainty in the economy those who are remaining will be more careful with their spending. This shows that private consumption will fall."
Desirable slowdown
Many say a correction is long overdue, and also healthy.
Khalfan Saeed Al Kaabi runs a handful of construction related companies and is based in Abu Dhabi.
"It's good for the construction industry to reduce its speed from 200 miles an hour to 40 miles an hour, and let the momentum restart again on a different foundation."
Damaged credibility
Many companies around the world and countries in the region have bought into Dubai's success. It is the financial, retail and tourism centre for the Gulf. But what does the future hold?
"Looking at the long term, Dubai has built itself on the promise of tomorrow and people have been buying into the dream it will deliver," according to Mr Foreman.
"It now says it will not be able to deliver these dreams, so as an investor that credibility has gone.
"Dubai needs to do a lot of work to restore that credibility over the next two years."
the BBC recently had a lengthy report on TV about the downturn in Dubai -
talkinh about "an impending desaster, if might things be worsening further in Dubai - if their rich Abu Dhabi brothers don't bail 'em out, they might be facing insolvency/ unability to pay back their 90 Billions Dollar debts ..."
and a mor recent articel in the BBC shed's some light on the downward tred in Dubai
"Global woes hit Dubai's fragile economy
By Malcolm Borthwick BBC NEWS | Business | Global woes hit Dubai's fragile economy
Editor, Middle East Business Report, BBC World, Dubai
Mr Vail spends time at the Creek rather than working
Pajani Vail came to Dubai a year ago to work in construction.
He is on a three-year contract, but has not worked or been paid for four months.
Mr Vail spends most of his time at the Creek in the old town in Dubai, chatting to friends who are looking for jobs and watching the dhows and abras sail past. "There are quite a few people like me," he says. "There are four or five people from my company looking for a job."
Waste of time
Mr Vail's employer is holding his passport and has told him to wait until work picks up again. Developers have got serious cash flow problems
In the meantime he sleeps on the streets or in the back of trucks.
"One day I have food, one day I don't," he says. "I have to borrow money from friends."
Having left a steady job in India to come to Dubai, Mr Vail is struggling to support his wife and two children back in Chennai.
"What is the point in being here when I have no food, no money and no job?" he asks. "This is a waste of my time. If I go back to India at least I am at home with my family."
No reserves
There are about 1.5 million Indians in the United Arab Emirates.
Guest labourers often leave Dubai when work dries up; many of them are blue collar labourers, living in rooms with six to 10 fellow workers.
An increasing number are, like Pajani, victims of the credit crunch.
Unlike its neighbour Abu Dhabi, Dubai does not have vast oil and gas reserves to fall back on. In many, ways Dubai is a victim of its own success.
It has embraced globalisation and aggressively diversified its economy into non-oil sectors such as financial services, tourism and real estate.
The Emirate is home to some of the most ambitious building projects on the planet. It is building the world's tallest tower and has just opened the world's biggest shopping mall. Not to mention the vast offshore islands.
Struggling developers
But now financial forces have turned, it is exposed.
The announcement by the property developer Nakheel last week that it is delaying construction of a tower that is set to soar more than a kilometre high, is a sign of the times.
The real estate market is beginning to unravel.
"Developers have got serious cash flow problems," says Colin Foreman from Middle East Economic Digest.
"Their revenue was coming from selling properties which hadn't been built yet and they were supplementing this with financing.
"Banks aren't interested in lending them money and nobody is interested in buying property, so their two avenues for finance have gone.
"At the same time they have got huge outgoings because they are building projects that they no longer have money to pay for."
Few statistics
It is easier for companies to lay off workers in Dubai than in the West because there are no unions. Industry insiders have told the BBC that tens of thousands of workers in the construction and real estate market alone have lost their jobs over the last few months. Some thousands of workers have just dumped their cars at the airport and fled the country, reportedly fearing for their jobs and nursing large debts. But it is tricky to quantify the extent of the job losses here as there are few hard statistics.
Regional relocation
Some workers have moved to other countries in the region, such as Qatar, in order to find work. Thanks to revenue generated by its vast gas reserves, Qatar's economy is booming.
It is expected to grow by 9% in 2009, which would make the Gulf state one of the fastest growing economies in the world this year. The British project management company Mace is one of many companies in Dubai trying to relocate its employees within the region.
"The largest reaction or action has been making redundancies," says Ian Tarry, Mace's Middle East director.
"However we have managed to relocate people to other parts of the group. In some case this has involved salary reductions.
"So far Abu Dhabi has taken some of the slack and we have relocated other workers to Saudi Arabia."
Expats and tourists
The worry is that the slowdown in the construction and the real estate sector could seep into the wider economy.
Around four-fifths of Dubai's population are expats.
Fewer expats mean less demand for property.
The tourism market is also being hit. Western tourists are cutting back on spending, and occupancy rates at many of Dubai's luxury hotels are down.
The slump in the non-oil sector is part of the reason why the Egyptian investment bank EFG-Hermes says the United Arab Emirates' economy will shrink this year.
"There are two factors which have supported private consumption," according to Monica Malik, director of economic research at EFG-Hermes.
"The expats who have spent money setting up houses and buying products and secondly the tourists.
"These are both going to fall rapidly, and with greater uncertainty in the economy those who are remaining will be more careful with their spending. This shows that private consumption will fall."
Desirable slowdown
Many say a correction is long overdue, and also healthy.
Khalfan Saeed Al Kaabi runs a handful of construction related companies and is based in Abu Dhabi.
"It's good for the construction industry to reduce its speed from 200 miles an hour to 40 miles an hour, and let the momentum restart again on a different foundation."
Damaged credibility
Many companies around the world and countries in the region have bought into Dubai's success. It is the financial, retail and tourism centre for the Gulf. But what does the future hold?
"Looking at the long term, Dubai has built itself on the promise of tomorrow and people have been buying into the dream it will deliver," according to Mr Foreman.
"It now says it will not be able to deliver these dreams, so as an investor that credibility has gone.
"Dubai needs to do a lot of work to restore that credibility over the next two years."
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In what way is Dubai worse?
Simple.
Larger drops in property prices. Up to 60% in some places. The rest around 30% so far.
Everyone agrees that property prices needed a correction - now middle class end-users are starting to be able to afford to buy.
Surely a good thing?
Much greater fall in the stock market. Well further than Dow or FTSE
most of the local companies are not even listed and are still majority government owned, so not the disaster that it appears if directly comparing with other markets
Much greater % of job lost. The unemployed figure is kept low by the fact that the unemployed have to leave so therefore are no longer counted.
But surely that makes the UAE better off? - they dont have to support a massive rise in unemployment and increased demand on welfare
As for new housing starts/approvals, Captial flows etc. All these type indicators would be horrific if they were published.
housing starts are at zero - but as demand has fallen not really a problem. It will be a problem in years to come when the economy picks up and there is increased demand but no building in the pipeline to support such a demand.
Thats how..
Simple.
Larger drops in property prices. Up to 60% in some places. The rest around 30% so far.
Everyone agrees that property prices needed a correction - now middle class end-users are starting to be able to afford to buy.
Surely a good thing?
Much greater fall in the stock market. Well further than Dow or FTSE
most of the local companies are not even listed and are still majority government owned, so not the disaster that it appears if directly comparing with other markets
Much greater % of job lost. The unemployed figure is kept low by the fact that the unemployed have to leave so therefore are no longer counted.
But surely that makes the UAE better off? - they dont have to support a massive rise in unemployment and increased demand on welfare
As for new housing starts/approvals, Captial flows etc. All these type indicators would be horrific if they were published.
housing starts are at zero - but as demand has fallen not really a problem. It will be a problem in years to come when the economy picks up and there is increased demand but no building in the pipeline to support such a demand.
Thats how..