Gavin Davids says strong government support helped the UAE avoid a mortgage crisis.
It has been nearly five years since the global financial crisis began and it’s been amazing (and vaguely terrifying) to see how quickly the world’s economic landscape has been changed, perhaps irrevocably.
In that time, we’ve seen some of Europe’s largest economies fall to their knees, while even the country with the highest GDP in the world, the United States, has become a shadow of what it once was.
Despite all this, we here in the GCC region have been largely insulated from the worst of the crisis, thanks in a large part to the abundant natural resources that have allowed the countries in the region to carry out their economic plans without having to cope with the issues faced by their European counterparts.
Of course, there have been massive challenges faced, especially here in Dubai, but when compared to the rest of the world; it could have been much, much worse. And for that, due credit has to be given to the economic leadership of the GCC, which has seen the entire region retain its standing as a hotbed for construction, development and growth.
That’s not to paint a rosy picture though, as recent studies by the International Monetary Fund have shown; we were perilously close to having our own version of a real estate mortgage crisis. And that, as I’m sure the majority of you would agree, would have been a very bad thing.
The UAE Central Bank has claimed that strong government financial support helped the country avoid falling into a real estate mortgage crisis similar to that of the US.
The apex lender says in its 45-page financial stability review report that the International Monetary Fund (IMF) has identified 46 systemic banking crises in which more than two-thirds were preceded by boom-bust patterns in house prices.
“The UAE real estate market witnessed a similar pattern. Fortunately banks avoided a major crisis largely because of the high concentration of the domestic development activity in the hands of UAE government-related institutions which benefited from the government support at a crucial time,” the Central Bank says.
“This has enabled the bust cycle to evolve in a controlled environment and limited the systemic spill-over,” it explains further.
The data showed the real estate in the UAE grew by almost 16.1% in 2007 before slowing down to 2.6% in 2008 because of the global financial crisis.
In 2009, the sector contracted by 13.2 %, and slightly rebounded by 0.1 and 0.7% in 2010 and 2011, respectively, the report showed.
Sobering figures, I’m sure you’ll agree, but when compared to the alternative, I’m fairly sure we’d all take them.
So I suppose what I’m trying to say is, we should be thankful for what we’ve got.
It sounds glib to say this, but I’ve lost count of the number of times I’ve heard complaints about how hard it’s been for construction firms over the last five years.
Of course it has; after all, we’ve only been in the worst financial crisis since the 1930s.
But in all seriousness, these firms deserve a lot of credit for sticking it out through the bad times, and now they’re deservedly getting their just rewards. We’ve come through the bad times together, and now it’s time to start reaping the benefits.