Many of the projects relaunched this weekend are those from the emirate's pre-crisis days – such as expanding the Business Bay Canal to the sea, thereby allowing passing yachts to sail to within a short distance of the Burj Khalifa.
But as borrowing costs fall and international liquidity rushes back, economists are wary of repeats of problems that led to the last property crash, approaching its third anniversary.
A Dh4 billion (US$1.08bn) raft of new developments would be a shot in the arm to the local real estate market, which is only now finding its feet, said Maren Baldauf-Cunnington, a senior economist with Aecom, the management and support services conglomerate. "This development is very welcomed by the local construction industry, which has been impacted by a slower than usual Abu Dhabi market," she said.
"However, Dubai will have to be careful to avoid another boom and bust, with industry stakeholders having to ensure that the recovery in the construction sector is built on strong foundations rather than on speculation."
There are enough signals to suggest that the credit bubble of 2007-2008 will not be repeated, said Liz Martins, an economist at HSBC Middle East. "Sentiment is improving," she said. "We're not going back to where we were in the boom years. Bank lending still is very weak … but global financial markets have been open to Dubai, and debt issuances this year have shown a degree of confidence in Dubai."
Dubai's appeal to international fund managers has been reaffirmed as large numbers of tourists arrive at the emirate's by air and sea, the property market strengthens and debt worries ease at companies, including Jebel Ali Free Zone Authority, the port operator, and DIFC Investments, the holding company owned by the emirate's financial free zone.
Dubai's government bond yields, which move in the opposite direction from price, have fallen substantially this year as international capital headed back towards the Arabian Gulf.
The emirate's 10-year bonds currently yield 4.43 per cent, down from 5.9 per cent at the start of the year. Credit default swaps for Dubai, which reflect the cost of insuring the debts of a government or a company against default, have fallen more than 220 basis points since the start of the year to 246.5.At current rates, it costs $246.53 to insure $10,000 of government debt for five years.
It is hoped that the Dubai Government's investment will also help to boost growth elsewhere in the emirate, particularly among small businesses. A Dh2.5bn drive to expand Madinat Jumeirah is an explicit bet on the continued health of the emirate's most successful sectors – tourism and retail.
"The Madinat Jumeirah hospitality cluster seems to have done very very well," said Giyas Gokkent, the chief economist at the National Bank of Abu Dhabi. "Expanding it makes sense … and will have a positive impact on the economy in the medium to long term."
The additional boost to the property market should also encourage other developers to return to the market, property analysts said.
"Real estate developments take two to five years for a development program," said Ian Albert, the regional director of Colliers International Middle East and North Africa. "We are now heading out of a negative cycle and prices are now increasing. Now is the right time for the Government to put money into these infrastructure projects. It's this sort of direct infrastructure work which will lead other developers to come in and build."
The National
19 November
