Dubai’s $20bn Debt Refinancing Deal Will Boost Property Market – Expert

Dubai’s $20 billion refinancing agreement with Abu Dhabi and the UAE Central Bank will improve the emirate’s economy, particularly boosting its real estate sector, say experts.

On Sunday, it was announced that the Abu Dhabi government would be rolling back $10 billion of Dubai’s debt maturing this year, with the central bank rediscounting a loan of the same value, also due in 2014.

The amount was extended to the Dubai government as emergency aid following the global financial crisis in 2009, when the emirate’s property market crashed.

The new debts are now renewable after five years, official news agency WAM reported.

“The refinancing deal is a welcome move clearly indicating that the UAE’s economy is back on track,” said Joe Tabet, chairman of UAE-based Pragma Group, which runs Cavalli club and Cirque Le Soir in Dubai.

“With market confidence moving upwards, we anticipate the emirate to fast track the development of a number of associated infrastructure, leisure and entertainment facilities that would drive tourism demand moving forward. This would ultimately result in the UAE capturing a larger share of international tourism.”

The refinancing deal will specifically improve confidence in Dubai’s property market, which has already rebounded strongly since the crash, said Mat Green, head of Research and Consultancy UAE, CBRE Middle East.

“The refinancing deal would further give impetus to UAE’s growing economy positively impacting all real estate assets,” he said. “The emirate is expected to fast track infrastructure and facilities, ranging from real estate and retail to transport links as part of its plans for Expo 2020.

“With sentiment already turning very positive over the past 12 months, the recent announcement is only likely to add fuel to the market, encouraging further inward investment as the emirate’s safe haven status is firmly underlined.”

Property prices in Dubai increased around 30 per cent last year, and developers in the emirate have launched dozens of new projects to cash in on growing demand.

Emaar, Nakheel, Damac and Deyaar have all recently reported of off-plan property launches selling-out soon after release.

While rapidly rising prices and flamboyant project announcements have raised concerns about the possibility of another real estate bubble, Green says the new deal will help subdue some of those fears.

“The refinancing deal along with a number of recent regulatory measures implemented by the UAE government will certainly have reinforced confidence in Dubai’s property market, curbing some investors apprehensions on market volatility,” he said.

“However, risks do remain, most prominently in the form of speculative investment activity which is driving growth in residential and land prices across the emirate.

“At this stage the supply pipeline is still too small to pose a risk, but looking further forward this could change as development activity increases further,” he added.