The rise in Brent crude to $60 a barrel and the trade volume ballast generated by the world’s first post Lehman synchronised economic recovery is hugely positive for UAE economic growth in 2018. After all, the UAE is unique because Abu Dhabi’s 100 billion barrels of proven oil reserves is complemented by Dubai’s role as the Gulf’s financial, logistics, aviation, shopping and services hub. The UAE growth delta is unquestionably positive and GDP growth can well double to 3% next year. The 10% fall in the US Dollar Index has also historically been a reflationary tailwind for the UAE property markets. I also expect a counter-cyclical, expansionary Federal budget to offset dismal private consumer spending and the protracted banking credit crunch. Ceteris paribus, higher government spending, faster payment of contractor debt and a new public sector liquidity cycle/fiscal stimulus has had a ‘trickle up’ impact on local property markets.
Unfortunately, benign macro factors will not offset those that caused rents and capital values to fall sharply since 2014. Why?
One, corporate consolidation (think NBAD-First Gulf, Ipic-Mubadala), the sharp downtown in global aviation, the oil and gas capex slump, the epic plunge in retail sales (Amazon is the Evil Empire for shopping malls!) and the sheer unaffordability of high end private education and health care has led to tens of thousands of executive job losses.
