shiva

ive spent the last 6 years living on the dxb side of the creek, not a huge fan of the other side

Benny80

Does anyone out there have any thoughts or insider knowledge on the effects of the continuing low oil prices?

Out of Abu Dhabi and Dubai which city is most likely to be effected? and are we likely to see construction projects stalling?

I'm currently working in construction in Abu Dhabi and enjoying life here so hope things will keep ticking along. I feel that the current low prices have got to have got to have an impact.

Millhouse

Thank you for waking this thread.

So since I started this thread oil rebounded to 62usd for a couple of days and settled to 60. This is not enough for the GCC to balance budgets. Over the last month Oil slipped to sub 50 and hit 44 last night (lowest this year). 6 months ago the story was over production. Today the story is not enough demand - and still the US frackers are adding new rigs.

The truth is it was always both - there is no good economic news anywhere. All commodities are in the gutter, China has slowed even if they at faking the stats and Catapiller reported its first sales slow down in years. If Catapiller are not selling plant there is no new construction happening.

So GCC government budgets will be destroyed. The gradual removal of fuel subsidies is a nice example as it is one that is politically very difficult to do so will never be the first budget cut. Last time fuel prices in UAE went up was in 2009. Given the regional security situation regional money will be used to build arms and ensure security - not be wasted on building low yielding tower blocks with marble lobbies or roads to nowhere.

I read here (and checked) Ramadan car sales are down. That's bad news.

So folks - no need for the foil hat and baked bean diet just yet but be prepared. Both emirates will be affected but AD will never be poor. Dubai is a bankrupt city as it stands so will be hardest hit - don't believe the story that it's not an oil based economy. It is indirectly an oil based economy as it is a confidence based economy and regional confidence goes hand in hand with oil. If history repeats then there will be a lot of rescheduling of AD projects and default and cancelation of Dubai ones.

I can't wait to see how the year ends up. The region is always interesting and we have issues on all fronts. Even ISIS hitting the major oil producers of Iraq, Libya, KSA has not dented the oil price tumble.

Of course, the beauty of the region is its ability to turn shit to gold so it is impossible to predict. The debt restructuring negotiations with Dubai dry docks are starting (again) as it is on the cusp of default. This will be an acid test in the next few months.

In the meantime, I will continued to make money by shorting every commodity and stock market Im brave enough to do.

Standanista

Good post. The word in rail is that some of the big Saudi projects look likely to be rescheduled.

The UK Telegraph has an interesting view this week:

Saudi Arabia may go broke before the US oil industry buckles - Telegraph

mikewot

In a new update on the financial status of the UAE, the International Monetary Fund (IMF) has advised additional taxation among several options for the UAE government to further strengthen its revenue base in order to minimise dependence on the fluctuating global oil price.

The UAE has already undertaken a number of fiscal reforms over the past years, including most recently the fuel price deregulation that saw retail petrol prices jump 24 per cent and diesel prices decline 29 per cent in the country.

Even as the IMF maintains that the UAE economy is resilient to low oil prices and sluggish global growth thanks to its fiscal buffers and safe haven status, the agency is suggesting the government to undertake additional reforms to boost its finances.


5% VAT, 15% tax on cars, broader corporate tax: IMF's advice to UAE - Emirates 24|7

DXBtoDOH

UAE government (Abu Dhabi) announced spending cuts for the first time in 13 years back in July.

UAE to cut government spending for first time in 13 years | The National

Outside of real estate I think Dubai is heading for sluggish times, not a severe crisis. Abu Dhabi is better placed because they don't have the vanity projects Dubai does. If your company has solid work in Abu Dhabi or Qatar you're probably fine. If you have too many Dubai tenders and work in Dubai, it's time to retrench.

It's interesting that rental prices in both cities are just about at parity when given the much smaller supply of quality housing in Abu Dhabi it should be more expensive than Dubai. Which was the case in the past. That leads me to think AD rents are accurate for its market but Dubai is grossly overinflated.

Abu Dhabi seems to have learned from Dubai's mistakes back in 2008-09 and shelved a bunch of high profile projects it really didn't need such as their metro/tram, but Dubai hasn't. Why am I not surprised.

mikewot

Dubai are still signing up for crazy vanity projects like this one: Dubai's Meydan launches world's tallest residential tower, world's longest indoor ski slope - ArabianBusiness.com

And they will shortly start pouring money into the new airport, plus the infrastructure required for it like the Metro and rail link to AD.

Millhouse

don't worry about the VAT - they have been advised that and discussed it for about 15 years. operationally way to difficult to implement in the GCC.

Standanista

The Abu Dhabi - Dubai rail link is happening anyway though, as part of the heavy rail GCC Kuwait - Oman mainline. Connecting to DWC makes sense as it passes close but the business case is there with or without an airport connection. Ditto Red Line extension, without getting too much into the realms of transport planning. I of course take your points about vanity projects but there's sound reasoning behind the rail expansion at least.

DXBtoDOH

Drove down Al Wasl the other day towards Satwa and then over to Dubai Mall.

I knew about City Walk and Box Park, which are quite nice. But with the new complex next to City Walk and a large new (presumably) luxury retail/accommodation strip) by Safa Park, there's a staggering volume of luxury retail space being constructed in that corner of Dubai. With the mall and downtown on the opposite side of Sheikh Zayed, won't there be a sheer glut of retail space available? How many variations of the same Lebanese restaurant or poncy Japanese bakery do you need?

But so far this city's appetite for luxury seems to know no end.

On an unrelated (or is it?) topic, the support pillars for the new flyovers on Al Wasl are being built. They look awful and wholly out of scale from the surrounding neighbourhood. It'll look awful. But the views will probably be nice.

scrubbedexpat141

We're all replaceable. That's all that matters, there'll be someone somewhere willing to do what you do for less, that's if it's permanently needed. Yes there will be the odd exception where someone like 'you' will be needed and they aren't cheap but in reality, nobody here can claim to be perfectly safe from the negativity another downturn would bring.

Therefore, have a beer, relax and enjoy it while it lasts.

Tockalosh

DXBtoDOH

Doesn't add anything new but confirms what's been speculated on here. Economy definitely slowing down, rents stubbornly high, meaning residents have less money to spend, helping to slow the economy even further. Purgatory!

Dubai’s non-oil growth slows down as weak crude prices hit tourism | The National

Meow

With all the new shops opening and proposed I am quite convinced that the plan is for there to be one shop per Dubai resident.

mikewot

Fixed, FOC.