Dubai Property Crash Spreading Across UAE – Luxury Resort Scrapped – Confidence Level Falls

You can almost smell the desperation emanating from the UAE at the moment. The latest in a long line of cancelled projects is the "Salam," a luxury hotel resort that had been planned om the beach front close to Bahrain's formula one track. Bahrain's Nass Corporation and South Africa's Murray and Roberts Holdings were due to build the luxury resort in a joint venture.

Damac and other developers are coming in for a lot of flak for refusing to pay full settlements to fired employees and there are a lot of unhappy ex-employees out there. My thinking is that the developers should be looking to the government to help pay these severance packages. No question many of the developers are broke, but when things settle down, if Dubai is serious about continuing to create a serious business center, they really need to show some class during the current situation.

Putting out misleading reports about the state of the Dubai property market is not helping either. In the meantime, the staggering amount of press releases pouring out of the UAE are confusing the life out of everyone. There's a financial crisis - the way to deal with it is to face it head on and be honest, not trying to fool everyone.

The Qatar government has just ordered Barwa Real Estate and Qatar Real Estate Investment to merge in order to confront credit crisis. Yet according to the Qatari Minister of State for Energy and Industry, project costs are declining, real estate demand is still on the increase and supply is still low. What? No money - no demand. Simple.

Salam Bahrain luxury resort Scrapped

Emaar says it plans to raise as much as $4 billion by two separate programmes of conventional and Sharia- compliant bonds.

"Emaar will raise capital under these securities as and when opportunities arise in the debt capital market and depending on Emaar's cash requirements," said a spokesman for Emaar. Assuming they can sell them.

The quarterly HSBC Gulf Business Confidence Survey also revealed some shocking news -

Business confidence in the Gulf fell sharply in the fourth quarter of 2008, from a rating of 92 in the third quarter to 70.3 in the fourth. The results show:

• Only 31% expect to see any growth in turnover (compared to 57% in Q3)
• Only 10% predict profits to grow by more than 15% (19% in Q3)
• 12% of business plan to shrink their investment budget this year, compared to only 4% three months ago.

"The change in sentiment has been steep and rapid," said Declan Hegarty, Co-Head of Global Banking at HSBC. "Our clients are telling us that while they predict a marked slow-down in activity in 2009, they also remain confident that business and trade in the region will continue, albeit at a reduced level from recent years. This is a slowdown, not a halt."

"The challenge for Gulf business is to stay competitive and to see out this slowdown," Hegarty added. "While we are under no illusions about the seriousness of this indicator, HSBC is also committed to helping its customers through tough times, as it has done in the past."

In another blow to confidence levels, the majority (59%) of business people see the current economic difficulties lasting for longer than a year, with 16% predicting more than two years of difficult times to come.