Concerns at all-time high
The Dubai Financial Market has been caught in a roller coaster of changes over the past few weeks. Recent news of firings at Arabtec, the UAE's largest listed builder, spurred a new round of panic. Shares in the stock exchange fell 6.7% to 4,009.01, leaving them down 25% from their May peak. It was the end of a long bull market.
Arabtec, the Dubai company that built the Burj Khalifa, has a stake high-profile projects worldwide, and has lost more than AED16 billion in market value in the past few weeks. The construction giant is thought to have fired its chief operating officer, chief information officer among other senior staffers since the resignation last week of Hasan Ismaik, its chief executive.
However, most analysts were reluctant to comment on whether this slump is permanent. "There was ridiculous exaggeration of the value of Arabtec on the upside, and we have no reason to think there won't be a ridiculous exaggeration on the downside," said Loic Pelichet of NBK Capital.
In the past year, Dubai's economy has picked up steam and is expected to grow by about 5% this year, according to the IMF. The realty sector has also rebounded strongly since early 2013. Analysts at London-based Capital Economics said the recent stock market selloff wasn't necessarily an echo of Dubai's previous crisis. "We would be wary of drawing too many parallels with the situation back then," they said. Authorities in Dubai have moved to curb speculation in the local property market, raising transaction fees and introducing mortgage caps.
Demand still seems rampant as well, especially in the off-plan market. The Danube Group's first venture into real estate development, a cluster of 171 town houses in the Al Furjan community being built for AED500 million, was sold out on the first day itself. Also, while prices of Dubai's prime residential property grew by just 1% quarter-on-quarter in the first three months of 2014, it is not the end of the bull run, according to global consultancy Knight Frank. In its latest report, it noted that Dubai's residential prices will resume on an upward path in the second half of this year.
Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. While concerns have been mounting amidst Arabtec's falling shares, most experts agree that it is difficult to predict what this means for the sector in general. Most also point out that there is now a need for new disclosure rules as the Arabtec rout dragged the Dubai Financial Market into bear territory. It definitely appears that transparency is key, moving forward, and it seems like the UAE is on its way there with being the most transparent market in the region.