Standstill in Dubai – precursor to the Malta slowdown?
Matthew Vella Crashing real estate prices and the worsening state of affairs for one of the richest emirates in the Middle East was always a dark shadow hanging over Smart City in 2009.
When, in 2009, construction in Dubai grinded to a standstill, Claudio Grech played down any potential effects from the worsening state of affairs on Smart City Malta. But this did not stop the rumours about the standstill at Ricasoli, which was then confirmed in September by finance minister Tonio Fenech.
How much of this slowdown was related to Dubai’s financial state back in the emirate, where real estate prices had dropped by over 30%?
“There is no doubt that the global crisis will have an impact on all major projects. Nevertheless, I am not aware of any specific impact on Smart City Malta arising out of the developments you refer to,” Grech had told MaltaToday when asked about the potential spill-over from the recession. He also pointed out that Smart City had been significantly capitalised with a €31 million injection back in January.
But in July, credit agency Moody’s downgraded the credit rating on Dubai Holding, which owns Tecom – SmartCity Malta’s parent company – down to A3 from A2 and placed it on review for further downgrade.
“Whilst Moody’s acknowledges that Dubai’s property market seems to have largely bottomed out, the financial and structural implications of its decline have taken its toll on the companies’ debt protection metrics,” said Philipp Lotter, senior vice president at Moody’s and lead analyst for Dubai Holding.
According to a JP Morgan report, a surplus of 31,000 residential units could be recorded in Dubai, mainly due to the decline in expatriate population. Indeed, in February more than 3,000 cars sitting in a parking lot at Dubai Airport – left there by debt-ridden foreigners (which make up 90% of the population there) fearing they could be imprisoned for failing to pay their bills.
The global financial crash revealed the fragility of Dubai’s economy. Huge infrastructural projects were abandoned. Businesses went broke, workers were laid off. Dubai turned to Abu Dhabi for a bail-out. How much of this unfortunate turn of events will be felt in Smart City Malta’s business projections is yet to be seen.
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