DUBAI, UAE - The Dubai property crash Mark II which began in 2014 is gaining momentum due to the coronavirus pandemic.
Damac, one of the emirate's biggest developers has recorded a $10 million loss, while Limitless is planning a restructure proposal to put to its creditors. In October a $315 million 101 floor skyscraper, was seized by the banks as the building was nearing completion.
Meantime credit ratings agency Standard and Poor's is reviewing the ratings of the large developers, putting most of them on negative watch - which means their credit rating is likely to be downgraded.
Emaar Properties, the largest Dubai-based devloper, which also owns some of the region's biggest shopping malls, and is the operator of The Address hotels chain, has its BBB- ratings under review with negative implications.
Damac has lost its B+ rating. It has been downgraded to B with a negative outlook.
"Owing to the liquidity crisis, we are confirming that the company will be unable to pay accrued profit at the end of March 2020," Limitless said in a 23 March letter to Mashreqbank, which heads a group of the company's creditors.
A team from Dubai World is reportedly advising the company's board.
The letter said the company is looking to come up with "a restructuring plan for the benefits of the participants and other creditors."
"To this end, we are in the final stages of engaging legal as well as financial advisers to assist us."
Property prices have been falling in Dubai since 2014 when the government doubled the transfer fee (equivalent to stamp duty in other countries) from 2% to 4%.`Real estate prices and rents have been diving ever since, and are now at levels last seen during the 2008 Global Financial Crisis. In the past six years, despite the slide, developers have been fiercely building new apartment towers, opening new estates for villas, developing man-made islands saturated with apartment towers and resorts, creating shopping malls, and spearheading a massive build-up of new hotels and resorts - most of which are now nearly empty, or are closed - due to the pandemic.
Etihad and Emirates have both been grounded and foreign arrivals into the country, once approaching 20 million per annum, have been halted.
The outlook for the sector is dismal as Dubai's population growth is at a standstill, and when the lockdowns and curfews are over, it will likely contract sharply as so many jobs have been lost. Dubai's two major industries are real estate and tourism, and both are likely to head into depression.
The government, possibly the most dynamic in the Gulf, has been quick to act to limit the damage. A move to suppress new development was made in September last year with the establishment of a committee to try and balance supply and demand. The move has probably come five years too late.
One of the other major catalysts for the growth has been the Dubai Expo, a six months international exhibition slated to commence in `October, however it may suffer the same fate as the Olympics, and may have to be delayed. Already the organisers are looking at a one year delay to allow the business community, locally and internationally, and tourism, to get back on its feet.
"While they remain firmly committed to Expo 2020, many countries have been significantly impacted by Covid-19 and they have therefore expressed a need to postpone the opening of Expo 2020 Dubai by one year, to enable them to overcome this challenge," Reem Al Hashimy, director general at Expo 2020 Dubai said Monday in a statement.
"The UAE and Expo 2020 Dubai have listened," Hashimy said.
Despite the precarious state of the economy, the Dubai government has taken no chances with the virus, cracking down on social-distancing with complete closure of bars, restaurants, cafes, gyms, spas, malls, cinemas, beaches and parks. There is a curfew from 8pm to 6am daily, during which anyone wanting to leave their homes to go outside have to obtain permission.